Energy Efficiency

Energy Efficiency edited by Jenny Palm

SCIYO

Energy Efficiency Edited by Jenny Palm

Published by Sciyo Janeza Trdine 9, 51000 Rijeka, Croatia Copyright © 2010 Sciyo All chapters are Open Access articles distributed under the Creative Commons Non Commercial Share Alike Attribution 3.0 license, which permits to copy, distribute, transmit, and adapt the work in any medium, so long as the original work is properly cited. After this work has been published by Sciyo, authors have the right to republish it, in whole or part, in any publication of which they are the author, and to make other personal use of the work. Any republication, referencing or personal use of the work must explicitly identify the original source. Statements and opinions expressed in the chapters are these of the individual contributors and not necessarily those of the editors or publisher. No responsibility is accepted for the accuracy of information contained in the published articles. The publisher assumes no responsibility for any damage or injury to persons or property arising out of the use of any materials, instructions, methods or ideas contained in the book. Publishing Process Manager Ana Nikolic Technical Editor Sonja Mujacic Cover Designer Martina Sirotic Image Copyright Alfgar, 2010. Used under license from Shutterstock.com First published September 2010 Printed in India A free online edition of this book is available at www.sciyo.com Additional hard copies can be obtained from [email protected]

Energy Efficiency, Edited by Jenny Palm   p.  cm. ISBN 978-953-307-137-4

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Contents Preface  VII Chapter 1 Energy Efficiency Policy  1 Zoran Morvaj and Vesna Bukarica Chapter 2 Energy growth, complexity and efficiency  27 Franco Ruzzenenti and Riccardo Basosi Chapter 3 Categorizing Barriers to Energy Efficiency: An Interdisciplinary Perspective  49 Patrik Thollander, Jenny Palm and Patrik Rohdin Chapter 4 Factors influencing energy efficiency in the German and Colombian manufacturing industries  63 Clara Inés Pardo Martínez Chapter 5 Oxyfuel combustion in the steel industry: energy efficiency and decrease of co2 emissions  83 Author Name Chapter 6 Low-energy buildings – scientific trends and developments  103 Dr. Patrik Rohdin, Dr. Wiktoria Glad and Dr. Jenny Palm Chapter 7 Energy transformed: building capacity in the engineering profession in australia  125 Cheryl Desha and Karlson ‘Charlie’ Hargroves Chapter 8 The energy efficiency of onboard hydrogen storage  143 Jens Oluf Jensen, Qingfeng Li and Niels J. Bjerrum Chapter 9 Energy efficiency of Fuel Processor – PEM Fuel Cell systems  157 Lucia Salemme, Laura Menna and Marino Simeone

Preface Global warming resulting from the use of fossil fuels is threatening the environment and energy efficiency is one of the most important ways to reduce this threat. Industry, transport and buildings are all high energy-using sectors in the world and even in the most technologically optimistic perspectives energy use is projected to increase in the next 50 years. How and when energy is used determines society’s ability to create long-term sustainable energy systems. This is why this book, focusing on energy efficiency in these sectors and from different perspectives, is sharp and also important for keeping a well-founded discussion on the subject. Transforming energy systems toward greater sustainability requires technological shifts as well as transformations in behaviour, values, and routines to conserve energy. This transformation can be facilitated by policy means and government initiatives as well as technological improvements and innovations. This book combines engineering and social science approaches to enhance our understanding of energy efficiency and broaden our perspective on policy making regarding energy efficiency. The book will be an essential read for anyone interested in how to contribute to the development of sustainable energy policies and achieve improved energy efficiency in industry, transport and the built environment. The book is organised as follows. In the first chapter Morvaj and Bukarica discuss how to design, implement and evaluate energy efficient policy. This is followed by chapter 2 where Basosi and Ruzzenenti highlight the rebound effect and problematise why the world sees a growth in energy consumption despite the trend of higher efficiency. The following three chapters focus on industrial energy efficiency. Thollander, Palm and Rohdin discuss earlier studies on industrial barriers and how STS-perspective can contribute to the barrier literature. Martinez compares factors that influence energy efficiency in German and Colombian manufacturing. Such comparison is important to improve our understanding of which factors are globally valid and which factors are more locally anchored. In chapter 5 von Schéele shows how specific technologies become important for achieving increased energy efficiency in industrial processes. Chapters 6 and 7 in different ways relate to development in the building sector. In chapter 6 Rohdin, Glad and Palm have done a literature review on methods and main results in scientific publications on low-energy buildings and low-energy architecture. In chapter 7 Desha and Hargroves discuss education of built professionals, such as architects, planners and engineers, and the challenge and opportunities that exist for future professionals with extensive knowledge about energy efficiency in buildings.

VIII

The last two chapters both concern how different technologies can contribute to achieve ambitious policy goals on energy efficiency. In chapter 8 Jensen, Li and Bjerrum compare different hydrogen storage techniques in terms of energy efficiency and capacity available. In the last chapter Simeone, Salemme and Menna present a comprehensive analysis of energy efficiency of fuel processor. Sustainable development demands new strategies, solutions, and policy-making approaches. This book discusses a wide spectrum of research on how to achieve ambitious policy goals on energy efficiency ranging from how energy efficient policy can be improved to how different technologies can contribute to a more energy efficient future. Editor Jenny Palm Tema T, Linköping University, Sweden

Energy Efficiency Policy

1

x1 Energy efficiency policy Zoran Morvaj1 and Vesna Bukarica2

2University

1United Nations Development Programme (UNDP) of Zagreb Faculty of Electrical Engineering and Computing Croatia

1. Introduction Access to all forms of energy at affordable prices is an impetus for economic and social development of the society. At the same time, energy sector is responsible for approximately 75 percent of total greenhouse gases emissions, which makes it the main provocative of climate change. The convergence of international concerns about climate change and energy security in the past decade has led to the increased awareness of policy-makers and general public about energy issues and creation of new energy paradigm, the focus of which is energy efficiency. Energy not used is arguably the best, the cheapest and the least environmentally damaging source of energy supply and nowadays the concept of "negawatts" in energy strategies worldwide is being introduced. However, energy efficiency being typically demand side option is hard to implement due to the variety of stakeholders, i.e. players in the energy efficiency market that need to be stimulated to adopt energy efficiency as a way of doing business and ultimately a way of living - the change of mindset is needed. As higher efficiency of energy use is indisputably a public interest, especially in the light of the climate change combat, policy interventions are necessary to remove existing market barriers hindering the fulfilment of potentials for cost-effective efficiency improvements. Policy instruments to enhance energy efficiency improvements must stimulate the transformation of the market towards higher efficiency, with the final aim of achieving cleaner environment, better standard of living, more competitive industry and improved security of energy supply. Moreover, they have to be designed according to the real needs of the market (tailor-made), and have to have the flexibility and ability to respond (adapt) to the changing market requirements in order to achieve goals in the optimal manner. Although there are excellent policies in place worldwide, with the European Union (EU) being the indisputable energy efficiency and climate change combat leader, the results in terms of reduced energy consumption are missing in the desired extent. Therefore, energy efficiency policy making needs new, innovative approaches the main feature of which is dynamics. Dynamic policy making means that it has to be learning, continuous, closed-loop process which involves and balances policy design, implementation and evaluation. The aim of this chapter is to explain these three main pillars of effective energy efficiency policy making, focusing especially on implementation issues, which are usually highly neglected in policy making process but are crucial for policy success.

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Energy Efficiency

2. Understanding energy efficiency policy making 2.1. Energy efficiency concept: avoid, reduce, monitor and manage The basis for understanding the concept of energy efficiency is energy flow, from primary energy contained in energy carriers to the useful energy consumed through various activities of the society (Fig. 1).

Fig. 1. Energy flow - basis for understanding energy efficiency Energy efficiency is all about tackling energy losses. As shown in Fig. 1, it boils down to the very simple and understandable equation: Euseful = Eprimary-Elosses

(1)

Losses occur in processes of energy transformation, transmission, and distribution as well as in the final uses of energy. While reducing losses in the first three activities is mainly a matter of technology, the latest should be tackled by both technical and non-technical measures. Often unnecessary uses of energy could be avoided by better organisation, better energy management and changes in consumers’ behaviour and increasingly so by changing lifestyle, which is the most difficult part. Energy efficiency has to be considered as a continuous process that does not include only one-time actions to avoid excessive use of energy and to minimise energy losses, but also includes monitoring and controlling energy consumption with the aim of achieving continuous minimal energy consumption level. Therefore, energy efficiency improvements rest on the following pillars (Morvaj & Bukarica, 2010):  Avoiding excessive and unnecessary use of energy through regulation (e.g. building codes and minimal standards) and policies that stimulate behavioural changes;  Reducing energy losses by implementing energy efficiency improvement measures and new technologies (e.g. waste heat recovery or use of LED lighting);  Monitoring energy consumption in order to improve knowledge on energy consumption patterns and their consequences (e.g. smart metering and real-time pricing).  Managing energy consumption by improving operational and maintenance practices.

Energy Efficiency Policy

3

To ensure continuity of energy efficiency improvements, energy consumption has to be managed as any other activity. Actually, energy management can be denoted as a framework for ensuring continuous avoidance of excessive energy use and reduction of energy losses supported by a body of knowledge and adequate measuring and ICT technology (Morvaj & Gvozdenac, 2008). It should not only consider techno-economic features of energy consumption but should make energy efficiency an ongoing social process. It also rests on the fact that energy has to be priced in a manner that more accurately reflects its actual costs, which include, inter alia impacts on the environment, health and geopolitics, and that consumers have to be made aware of these consequences of energy use. These main pillars for achieving energy efficiency improvements have to be taken into account in the policy making process - "avoiding" and stimulation of "reducing" shall be a main driver in design of policy instruments, while for "monitoring" and "managing" implementing capacities with appropriate capabilities and supporting infrastructure shall be ensured. 2.2. Rationale behind energy efficiency: means not an end Energy efficiency shall be regarded as a mean to achieve overall efficient resource allocation (Dennis, 2006), rather then the goal in it self. As a consequence of improved energy efficiency, other public policy goals will be achieved as well, the most important of which are the goals of economic development and climate change mitigation. In economic terms, and taking into account the fact that energy costs typically account to 15 to 20 percent of national gross domestic product, the significance of energy efficiency is evident - reduced energy consumption lowers the costs for energy. For example, it is estimated that the EU, although the world's most energy efficient region, still uses 20 percent more energy than it would be economically justified, which is the equivalent to some of 390 Mtoe (European Commission, 2006) or the gross inland consumption of Germany and Sweden together (Eurostat, 2009). Furthermore, global consensus is emerging about consequences of inaction for mitigation of an adaptation to climate change, and clear quantifiable targets (limiting CO2 concentration and temperature increase) within the given time frame (until 2012, than 2020 and finally 2050) need to be achieved if wish to avert a major disasters in the foreseeable future. For the first time energy policy making is faced with such strict constraints, which require a radically different approach in the whole cycle of policy making with special emphasis on policy implementation. Energy efficiency is globally considered to be the most readily available and rapid way to achieve desired greenhouse gases reductions in the short to medium term. And taking into account the possible grave threats of climate change, the time scale in energy policy has never been more important. Let us briefly look at the evolution of energy policy making and the role of energy efficiency (Fig. 2.). The standard energy policy making approach implied balancing of energy demand and supply and slow evolution of policy goals, mixes and objectives as a response to various external changes and drivers. The standard energy policy making was not faced with serious constrains and specifically not time constraints for achieving certain results and objectives. The time scales of energy policies were rather long, actions were gradually undertaken (leading often to under investing in energy sector) and mainly left to the decisions of energy companies, which led to the critical neglect of energy policy implementing capacities at various levels of jurisdiction and in the society in general.

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Energy Efficiency

Nowadays, energy policy is entering a new constrained phase, with time as the main constrain being imposed by the desire to combat climate change.

Fig. 2. Gradual changes of energy policy accents due to various drivers (Morvaj & Bukarica, 2010) Energy efficiency solely can deliver the desired greenhouse gases reduction targets to the large extent. To confirm the statement, the EU has been taken as an example. It is estimated that fulfilling 20 percent target for energy efficiency improvements by 2020 would mean reducing greenhouse gases emissions by 780 million tonnes, more than twice the EU reductions needed under the Kyoto Protocol by 2012 (European Commission, 2006). Since the EU has committed to reduce its greenhouse gases emissions by 20 percent compared to 1990 by 2020 and since the EU's greenhouse gases emissions in 1990 amounted 5,564 million tonnes (European Environment Agency, 2009), it is evident that 20 percent of energy efficiency improvement can deliver almost three fourths of desired greenhouse gases reduction target. The power of energy efficiency as a tool for climate change combat is therefore obvious. 2.3. Levels of energy efficiency policy: from enabling to implementing Taking into account the role energy efficiency plays in reaching global goals of climate change combat, it is understandable that there is a need for coordinated actions at all levels international, regional (e.g. European Union) and national to ensure enabling environment for energy efficiency improvements by formulating appropriate policy instruments. However, the real power to change is local. Policies have to be designed in a way that enables local implementation in homes, public services and businesses. The interconnection between levels of energy efficiency policy is illustrated in Fig. 3.

Fig. 3. Levels of energy efficiency policy

Energy Efficiency Policy

5

2.3.1. International aspect of energy efficiency policy Due to its significance, energy efficiency is the topic of international agreements related to climate change combat, environmental protection and security of energy supply. Money and effort are put into promotion of energy efficiency by numerous international institutions, as briefly demonstrated in Table 1. International treaties and agreements on Climate Change and EE Name of the document Year Main features Energy Charter Treaty 1994 Legally-biding multilateral instrument, obliging parties, inter alia, to reducing negative environmental impact of energy cycle through improving energy efficiency Energy Charter Protocol on 1994 Recognises EE as considerable source of energy and obliges EE and Related parties to promote EE and to create framework which will Environmental Aspects induce both producers and consumers to use energy in the (PEEREA) most efficient and environment friendly way as possible Kyoto Protocol to United 1997 Obliges parties to reduce GHG in time period 2008-2012. Nations Framework Defines flexible mechanisms that will ease the achievement Convention on Climate of targets at the least cost Change (UNFCCC) International institutions/programmes for energy efficiency Institution/Programme Year Main features Global Environment 1991 - GEF is main financial mechanism of UNFCCC; GEF has Facility 2009 supported 131 EE projects with portfolio of approximately 850 million USD World Bank Group 2005Renewable energy and EE at the heart of WBG energy 2009 agenda; in period 2005-2009 over 4 billion USD given for EE projects world wide United Nations / Energy as an important factor in reaching Millennium Development Programme, Development Goals and reducing Poverty; Calls for United Nations Foundation international “Efficiency First” agreement; Number of EE projects financed world wide International Energy / EE one of six broad focus areas of IEA's G8 Gleneagles Agency Programme - IEA submitted 25 policy recommendations to the G8 for promoting EE that could reduce global CO2 emissions by 8.2 gigatonnes by 2030.

Table 1. International treaties and programmes for energy efficiency (Morvaj & Bukarica, 2010)

As seen from Table 1, international treaties and programmes are supported by various financing tools, bilateral and international donors, but there is very little focus on how to implement policy measures and instruments, hence the real results in terms of sustainable and verifiable energy efficiency improvements and greenhouse gases reductions are missing. It is absolutely crucial to shift the focus of international policies towards real-life application, respecting in this process different local circumstances. Namely, the drivers for energy efficiency and implementing environments differ significantly on the global scene. Four "blocks" could be identified as shown in the Fig. 4. The EU, followed by some other OECD countries, is certainly a forerunner in combating climate change and in related energy efficiency activities. USA and BRIC countries are the most vocal in defending their national interests and resisting any firm commitments for CO2 reduction. Developing countries collectively represent a significant block in terms of

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Energy Efficiency

greenhouse gases emissions. Energy efficiency is for them a win-win approach for reducing the greenhouse gases emissions while also reducing costs of energy for their fragile economies. Therefore, energy efficiency in developing countries should be addressed immediately and incorporated in energy policies with strong supporting implementation mechanisms.

Fig. 4. World differences in climate change and energy efficiency policies adoption (Morvaj & Bukarica, 2010) The efforts from the international level are extremely useful and necessary, but they are still not enough, i.e. they are generic in their nature, hence are not able to deliver real results. International policies, programmes and aids shall be brought down to the national and local level in every "block", where conditions for policy implementation are different, requiring thus tailor-made solutions in both policy instruments and implementing capacities. 2.3.2. Regional energy efficiency policy: case EU The indisputable "energy efficiency forerunner" in the world is the European Union (EU). The EU has strongly stressed its aim to achieve the "20-20-20" targets by 2020: to reduce greenhouse gases emissions minimally 20 percent (with the intention to even achieve 30 percent greenhouse gases emission cut by 2030); to increase the proportion of renewable energies in the energy mix by 20 percent and to reduce primary energy consumption by 20 percent. In order to achieve the energy efficiency improvement goals, the EU has introduced a well thought of set of voluntary and some mandatory polices. The most important policy and legislative documents related to energy efficiency in the EU are summarised in the Table 2. EU policy documents on EE Name of the document EE in European Community – Towards a Strategy for the

Year 1998

Main features Analyse available economical potential for improvements in energy efficiency, identifies barriers

Energy Efficiency Policy

7

Rational Use of Energy (COM (1998)) 246 final) Action Plan to Improve EE in the European Community (COM (2000) 247 final)

2000

Green Paper on EE or Doing More with Less (COM (2005) 265 final)

2005

Action Plan for Energy Efficiency: Realising the Potential (COM(2006) 545)

2006

Second Strategic Energy Review - An EU Energy Security and Solidarity Action Plan (COM/2008/0781)

2008

EU EE legislation (directives) Directive 92/75/EEC on energy labelling of household appliances and implementing directives Directive 2002/91/EC on the energy performance of buildings (Proposal for a Directive on the energy performance of buildings (recast) [COM(2008)780])

Directive 2004/8/EC on the promotion of cogeneration based on a useful heat demand in the internal energy market Directive 2005/32/EC establishing a framework for the setting of eco-design requirements for energy-using products and implementing directives Directive 2006/32/EC on Energy end-use Efficiency and Energy Services

and gives proposals to remove those barriers. Estimates that saving of 18% of 1995 energy consumption can be achieved by 2010 (160 Mtoe). Sets a target for energy intensity improvement by an additional 1% per year compared to a business as usual trend resulting in 100 Mtoe avoided energy consumption by 2010. Expresses urging need to put energy saving policy higher on the EU agenda and estimates that EU is using 20% more energy then economically justifiable and if additional efforts are not made, this potential will not be fulfilled by current policies. Sets energy saving target of 20 percent by 2020 (390 Mtoe) and defines 6 priority policy measures (energy performance standards; improving energy transformation; focusing on transport; providing financial incentives and ensuring correct energy pricing; changing energy behaviour; fostering international partnership). Reinforces EE efforts to achieve 20% target - calls for revision of directives on energy performance of buildings, appliance labelling and eco-design, strongly promotes Covenant of Mayors, use of cohesion policy and funds and tax system to boost energy efficiency.

1992

Prescribes obligatory EE labelling for 8 groups of household appliances.

2002 (reca st prop osed in 2008) 2004

Calls for minimum energy requirements for new and existing buildings, energy certification and regular inspection of boilers and air conditioning systems.

Facilitate the installation and operation of electrical cogeneration plants.

2005

Defines the principles, conditions and criteria for setting environmental requirements for energy-using appliances.

2006

Calls for establishment of indicative energy savings target for the Member States, obligations on national public authorities as regards energy savings and energy efficient procurement, and measures to promote EE and energy services.

Table 2. EU policy documents for energy efficiency (Morvaj & Bukarica, 2010)

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Energy Efficiency

The analysis of these documents clearly shows the commitment and huge policy efforts to boost energy efficiency improvements. Despite that, the EU is far from reaching its 20 percent energy efficiency improvement target by 2020. The results of the policy implementation are missing in the desired extent, leaving the huge potential of "negawatts" idle. With the current legislation and policy instruments in place, a reduction of only 8.5 percent will be achieved. Even taking into account additional measures in the pipeline, at the best only 11 percent reductions will be achieved, as shown in the Fig. 5 (European Commission, 2009). However, the EU policy only provides the framework national policies have to cope with. It is, to the largest extent, the task of national policies to deliver actual energy efficiency improvements. Obviously, they are failing to do so. Mtoe

No EE policy PRIMES 2007 baseline

2.200

PRIMES 2009 baseline

2.100

( adopted, policies)

EE policy mix

(PRIMES 2009 + additional measures)

20% EE target

(according to PRIMES 2007 baseline)

445 Mtoe

2.000 1.900

- 8, 5%

1.800

-11 ,3 %

1.700

-20%

1.600 1.500 1990

1995

2000

2005

2010

2015

2020

Fig. 5. Development and projection of Gross Inland Energy Consumption for EU by 2020 (European Commission, 2009) 2.3.2. National energy efficiency policy: (not) delivering targets In national energy efficiency policy there is a symptomatic unbalance between efforts for preparing polices, and preparations for policy implementation. The vast majority of policy makers are focused on incorporating requirements of international policies and requirements into national strategic and legislative frameworks, without thorough consideration of national circumstances, i.e. without taking into account the level of energy efficiency market maturity in a country. Moreover, there is a general lack of focus on policy implementation and a sort of general expectation that implementation is straightforward, will hopefully happened by itself, hence there is no need to put too much efforts into that. Current national energy efficiency policies are persistently missing or underachieving the desired results. There are number of reasons behind this policy failure, but the problem is essentially threefold: 1. Policy makers do not fully tackle all stakeholders relevant for energy efficiency, i.e. not all market players are tackled with appropriate policy instruments that would remove market imperfections and enable sustainability. There is a need for all-a-compassing, tailor-made policies, adaptive to specific changing market conditions.

Energy Efficiency Policy

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2.

Policy making needs to appreciate specific implementing environment conditions and time constraints for implementation, thus focusing on creating sufficient and appropriate implementing capacities that are adequate for achieving the targets. A model for developing implementing capacities shall be established. 3. Policies are not static, meaning that policy making is not on-time job. It requires well established procedures for policy monitoring and evaluation that will reveal what works and what does not work in the practice and provide inputs for policy improved redesign. Obviously, new approach in overall energy efficiency policy making is needed, the main feature of which is dynamics. 2.4. Policy dynamics: key to effective energy efficiency policy making For energy efficiency policy to be successful its creation has to be a learning process based on both theoretical knowledge and empirical data. This learning process can be the most appropriately described by the closed-loop process (Fig. 6) consisting of the following stages:  Policy design: o Policy definition: objectives, targets, approaches for different target groups, legal and regulatory frameworks; o Policy instruments development: incentives, penalties, standards, technical assistance, financing support;  Policy implementation: institutional framework, stakeholders, human resources, capacity and capability development, supporting infrastructure (ICT);  Policy evaluation: monitoring of achieved results through energy statistics and energy efficiency indicators, qualitative and quantitative evaluation of policy instruments' impacts. Deciding on Redefinition of EE policy

MARKET ASSESMENT

Design of EE Policy

SUCCESSFULL IMPLEMENTATION of Energy Effciency Improvement Project

Target Group

Evaluation of EE Policy

REPETITION!

Implementation of EE Policy TRANSFORMATION!

Energy Efficiency Market

Fig. 6. Dynamics of energy efficiency policy (Bukarica et al., 2007)

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Energy efficiency policy in its essence shall be a market transformation programme. Market transformation programmes are strategic interventions that cause lasting changes in the structure or function of markets for all energy-efficient products/services/practices (Brinner & Martinot, 2005). The effective market transformation programme rests on the following key pillars:  mix of policy instruments created to remove market barriers identified throughout all stages of the individual energy efficiency project development;  policy interventions adaptive to market conditions ensuring sustainability of energy efficiency improvements through replications of successfully implemented energy efficiency projects;  policy instruments tailored to enable all market players (government, private sector, consumers, equipment producers, service providers, financing institutions, etc.) to find their interest in improved energy efficiency;  energy efficiency improvements achieved as the result of supply-demand interactions based on competitive market forces. Therefore, prior to the start of energy efficiency policy design the market assessment shall be preformed. It shall reveal the maturity of the market. This is extremely important, as different instruments have different effects and are therefore appropriate at different market maturity levels, i.e. some measures could stimulate market introduction, whereas other measures could accelerate commercialisation, or increase the overall penetration of energyefficient products and services (Brinner & Martinot, 2005). Market analysis is required to identify market forces that have to be strengthened by incentives or diminished by penalties. The policy instruments should be carefully designed and mixed in order to tackle identified market barriers. Conceptually, the typical energy efficiency policy cycle starts with strategic planning and determination of targets leading to the design of specific instruments to tackle different target groups, i.e. market players. The implementation of policy instruments follows and one cycle is concluded with the evaluation of policy impacts. The results of the policy evaluation process are then fed into the planning, design, and implementation processes, and the cycle repeats itself (Vine, 2008). Every stage in this dynamic loop requires methodical and systematic approach and will be given all due attention in the subsequent sections.

3. Main postulates for defining effective energy efficiency policy 3.1. Understanding energy efficiency markets The starting point in creation of any policy is to understand how market operates and how well developed it really is. Unlike the economic theory that assumes perfect competition, the real markets are imperfect due to various barriers preventing market forces to deliver desired results. The task of any policy is to identify these barriers and to develop market-based incentives and well-designed, forward-looking instruments for their removal (Dennis, 2006). Policies usually define various instruments to support implementation of energy efficiency measures in energy end-use sectors (households, services, industry, transport). Very often, the proposed instruments are generic and designed without a proper appreciation of the situation on the ground – an energy efficiency market place where energy efficiency measures need to be adopted by consumers, supported by energy service providing

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companies. Addressing end-users solely is not nearly sufficient to ensure self-sustainable energy efficiency improvements. The concept of energy efficiency market shall be introduced and understood for creating and implementing energy efficiency policy. Energy efficiency market is not exactly one market but a conglomeration of various and very diverse businesses acting in the field and having different interests in energy efficiency realm. Energy efficiency market's supply side includes providers of energy efficient equipment and services as well as institutions involved in financing and implementation of energy efficiency projects (banks, investment funds, design engineers, constructors, etc.). The demand side of energy efficiency market includes project sponsors with ideas for energy efficiency improvements (end-users, i.e. building owners and renters, building managers, public sector institutions and local authorities, industries). The performance of energy efficiency market is evaluated according to the actual energy efficiency improvements delivered, i.e. according to number of successfully implemented energy efficiency projects. Basically, the energy efficiency market transformation depends on the success of the project development process. Development of an energy efficiency project goes through various stages, from the very initial idea, until the final and actual implementation of the project that operates and yields results in terms of reduced energy consumption and emissions (Fig. 7). Due to various market barriers, only few of a variety of identified opportunities for energy efficiency improvements reach the stage of a bankable project, becoming actually implemented; hence the narrowed pipeline presentation is chosen.

Fig. 7. Understanding energy efficiency projects' development cycle and energy efficiency markets (Bukarica et al., 2007) 3.2. Definition of policy instruments for market transformation One of the main reasons for energy efficiency policy failure lies in the preference of policy makers to use universal solutions in definition of energy efficiency policy and basically to copy-paste policy instruments from others without considering the specificities of own country's energy efficiency market. There are, of course, some general market barriers for energy efficiency which require such universal solutions (Table 3), but they are not nearly sufficient to provoke market transformation and to fulfil the final goal - creation of selfsustainable energy efficiency market.

12 Primary Barriers Incomplete (imperfect) information EE as public goods

Energy Efficiency Effects

Solutions

Affects both demand and supply side of EE market leaving the demand underdeveloped and supply side disinterested Markets tend to undersupply public goods

Dedicated promotional and informational campaigns; Energy labelling of appliance, equipment, buildings and cars Stimulating Research and Development of energy efficient technologies; Voluntary agreements with manufacturing industries Correct energy pricing and energy taxation; Environmental fees (but usually imposed to large consumers only); Tax credits for EE investments ; Minimal efficiency standards; Utilising purchasing power (green public procurement and consumers' awareness) Transforming utilities to become energy service companies; Smart metering and real-time pricing; Smart appliances

Externalities

Energy price does not reflect the adverse environmental and human health effects of energy consumption nor impacts of political instabilities related to energy supply; Positive externalities of improved EE should also be taken into account.

Market power (imperfect market structures)

Remains of monopoly in energy sectors prevent development of truly competitive energy markets and restructuring of utilities to become energy service companies; Improper structures of energy prices based on historical average costs and not on short-run marginal costs

Secondary Barriers consequences of primary barriers Lack of access to capital

Effects

Solutions

Makes it difficult or impossible to invest in energy efficiency

Mindset (rather then market) barrier Consumers' behaviour

Effects

EE (revolving) funds (as initial driver of demand for energy efficient solutions); Transforming utilities to become energy service companies Solutions

Optimal decisions will not be made regardless sufficient information provided due to bounded rationality

Energy and climate literacy (a top educational priority in schools and in the public discourse)

Table 3. General market barriers to energy efficiency and universal solutions (Morvaj & Bukarica, 2010) Instead of routine proposals of generic policy instruments, specific status of energy efficiency market in a given jurisdiction has to be understood, and for every stage in the energy

Energy Efficiency Policy

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efficiency project development process specific barriers must be identified and support policy instruments designed to ensure project pipeline throughput (Bukarica et al. 2007). In other words, policy instruments have to be tailor-made for specific market circumstances. Energy efficiency market has a variety of players with different backgrounds and as such is highly influenced by behavioural, socio-economic and psychological factors that govern market players’ decisions. All these influences have to be taken into account when defining policy instruments for energy efficiency improvement. As indicated in the Fig. 8, combination of policy instruments has to be used to remove both supply and demand side barriers, i.e. both supply and demand side have to be addressed simultaneously when markets are “stuck”. In other words, producers/service providers have to be stimulated to produce/offer more efficient products/services, while consumers have to be stimulated to by such products/services. What this means is that if there is no demand for energy efficient products/services suppliers are not interested in improving their performance by themselves and vice verso, if there is no efficient products/services offered in the market, there is no demand for them either. Policy instruments have to be designed to move this situation from the deadlock and to fulfil the ultimate goal of market transformation - to achieve public benefits from increased energy efficiency as accepted mode of behaviour (Bukarica et al., 2007).

Fig. 8. Defining energy efficiency policy instruments based on actual status of a specific energy efficiency market (Morvaj & Bukarica, 2010) (Note: the scheme was developed during market assessment and creation of energy efficiency policy in the Republic of Croatia) Policy-makers have to understand that policy instruments are not equally relevant at all points in time – the requirement for different instruments vary with maturity of the market and timing of utilisation. Therefore, policies have to be adaptive to changing market conditions.

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Adaptive policy response means that utilisation of instruments and funding designated for their implementation must correspond to the market demands. E.g. offering partial financial guarantees to the banks will have very modest impact in markets where there is no demand for energy efficiency projects and banks do not find the interest to offer specialised financial products for the. As a general guideline, instruments for awareness raising and technical assistance are more important in developing energy efficiency markets, while with its maturity financial incentives become increasingly desired. 









 

Not all policy instruments are suitable for all markets: o Understand the maturity level of country's energy efficiency market and tailor policy instruments to overcome identified barriers; o Use experiences of others, but do not copy-paste without taking into account real market situation - what works in one country, does not have to work in other; o Every policy instrument has its right timing for implementation - take one step at time to ensure smooth transformation of the market i.e. smooth transition from one phase to another as shown in Fig. 7; Not all policy instruments are suitable for all market players - be specific in determining target groups for a certain policy instrument (e.g. voluntary agreements are not suitable for households consumers, while appliance labelling will have little to do with large industry consumers); Not all policy instruments are suitable for all energy end-use sectors (households, public services, private services, industry, and transport) - sectors' specificities shall be taken into account; Sometimes it is useful to determine package of instruments (combinations of two or more instruments, e.g. building code in combination with subsidies for demonstrating achievement of higher standards or promotion campaign for cleaner transport in combination with subsidies for purchasing hybrid cars) to increase policy effectiveness and efficiency; Identify sectors that can be the best tackled by policy and that would have the largest immediate and spill-over effects: o Experience shows that putting policy focus on public sector is both easiest to implement and it provides the largest spill-over effect to other sectors by demonstrating effects of energy efficiency improvements, but it also has a potential to transform the market in a short span of time due to large purchasing power of the public sector; o Buildings usually consume more then 40 percent of country's energy demand, therefore this sector offers the largest potential for energy efficiency improvements (especially existing building stock) that could be achieved through advanced building codes and energy performance standards; Look for local best practices and make them national - often there are local initiatives in a country that have great results and capability for replication; Be aware of your implementing capabilities - available budget and, even more important, institutional capacities needed for implementation of policy instruments.

Box 1. "Quick-win" guidelines for designing successful energy efficiency policy instruments

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4. Energy efficiency policy implementation 4.1. Understanding implementing environment The immediate questions aimed at understanding the "implementing environment for energy efficiency policies" are:  Who has to do what? In other words, what are the roles and responsibilities of different stakeholders.  Were the implementation has to happen? The answer, although as simple as possible, is often overlooked - policy needs to be implemented where energy is used everyday – and this is at our places of work and at our homes. It is very simple fact that all energy delivered is consumed directly by people or indirectly through different institutional and business forms created by people (Fig. 9), during the course of our professional and private life. Therefore, for implementation of energy efficiency measures and a full policy uptake, the mobilisation and cooperation of all stakeholders is needed. The international institutions and efforts form an umbrella of this implementing environment, dictating the framework for policy creation and implementation (as discussed in the section 2). At national level, four key groups of stakeholders, i.e. vertical social structures can be identified (Fig. 9), all of which have their specific roles in energy efficiency policy implementation and their activities (or lack thereof) influence the energy efficiency market. The primary role of the public sector institutions is to ensure national policy implementation in all end-use sectors (households, services, industry and transport). However, at the same time the public sector, same as businesses, are the realms where policy is actually being implemented. Civil society organisations and media, on the other hand, play the key role in providing information and promoting energy efficiency on the wide scale, which will, in the long run, enable changing the consumers' mindset towards more energy efficient behaviour.

Fig. 9. Main pillars of implementing environment for energy efficiency policy

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4.2. Roles and responsibilities of key stakeholders Public institutions play, with no doubt, pivotal role in enabling and enhancing policy implementation. However, the governments, i.e. competent ministries themselves rarely have the capacities to deal with policy implementation issues. Therefore, in many countries specialised national energy efficiency agencies are established as governmental implementing bodies. They have a crucial role in initiating energy efficiency programmes, coordination of activities and especially in monitoring and evaluation of policy implementation. To support this statement, a fact that nowadays more than 70 percent of European population lives in cities has to be emphasised. Even more so, in 2009 for the first time in history official statistics have reported that globally more than 50 percent of world population lives in cities. Hence cities are obvious places where vigorous, continuous and focused implementation of energy efficiency measures needs to be carried out by all key stakeholders (see Fig. 3). Being closest to places where energy is consumed and still having executive powers, local authorities more than ever have a pivotal role to play at reducing energy consumption. Actions that local authorities (and public sector in general) should undertake are twofold:  Firstly, energy consumption in facilities and services in their jurisdiction should be properly managed. This means that local authorities shall demonstrate their commitment by implementing energy efficiency improvement measures in all buildings in their jurisdiction (office buildings, schools and kindergartens, hospitals, etc.) as well as in public services they provide (public lighting, transport, energy and water supply).  Secondly, information must be made publicly available and cooperation with civil society organisations, businesses and media has to be established to improve citizens’ awareness and facilitate change of energy related behaviour and attitude. Building local capacities to perform these activities is the most important precondition for successful policy implementation and delivering policy targets. Introduction of full-scale energy management is instrumental there, which could be a backbone for evolution of "smart cities" and sustainable urban development (Paskaleva, 2009). In all business sectors, the climate change awareness and social responsibility are driving companies to demonstrate their "greenness". The new "green" revolution in the corporative world is led by the biggest - Google and Microsoft are going solar, Dell is committed to neutralising carbon impact of its operations, Wal-Mart aims at completely renewable energy supply, crating zero waste and selling products that sustain resources and the environment (Stanislaw, 2008). However, while corporations do have money and human capacities to turn their business towards more efficient and environmentally friendly solutions, small and medium enterprises (SMEs) need role-models and support to improve their energy efficiency, hence the overall business performance. The 2007 Observatory of EU SMEs indicates that only 29 percent of SMEs have instituted some measures for preserving energy and resources (46 percent in the case of large enterprises) and that only 4 percent of EU SMEs have a comprehensive system in place for energy efficiency, which is much lover then for large enterprises (19 percent) (European Commission, 2009). Again, energy management is the solution. And finally, policy makers together with civil society organisations, businesses and media have to work together to ensure that energy and climate change literacy (Stanislaw, 2008) becomes a top educational priority in schools and in the public discourse. In this task, civil

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society organisations and media have particularly important role, since they formulate the public opinion and are able to establish a new "green" ethic in rising generations. Therefore, the solution for ensuring proper implementing environment for energy efficiency policies lies in bringing together and mobilizing for action all stakeholders so that every pillar of the society contributes fully according to their own means for achievement of energy efficiency policy targets. Strong links, as demonstrated in Fig.10, between each and every stakeholder shall be established, not only whilst implementing policy, but immediately during the process of energy efficiency policy design. Either link is equally important as the current practice has indicated that policy making lacking feedback from all stakeholders results in weak and slow implementation. The Fig. 10 aims to illustrate the need for stakeholders' interactions in various energy efficiency activities, and points that such coordinated and collaborative approach will influence citizens and eventually transform the market and society towards higher efficiency.

Fig. 10. Stakeholders' interactions in different energy efficiency activities 4.3 Building implementing capacities through Energy Management System Implementing capacities can be successfully strengthen through the process known as Energy Management System (EMS). It comprises a specific set of knowledge and skills based on organizational structure incorporating the following elements:  people with assigned responsibilities  energy efficiency monitoring through calculation and analysis of: o energy consumption indicators o energy efficiency improvement targets

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

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continuous measuring and improvement of efficiency.

Fig. 11. Concept of energy management system (Note: EMS is equally applicable in public and business sector) The process of introducing energy management starts from the decision of adopting an energy management policy statement. It then leads to an energy management action plan being adopted at the top management level. Measurable goals to be achieved are set within the plan. The plan with defined goals is made public. This act ensures a constant support of the top management and all employees to the implementation of energy management project. This is followed by introduction of organizational infrastructure to deliver the plan. A dedicated energy management team is appointed which assumes the obligation of overall energy management on the level of a city or a company. Furthermore, every facility in the structure of a company or in the ownership of a city has to have a person (usually technical or maintenance) appointed as the one responsible for the local energy management. And finally, all members of energy management team shall be adequately educated and trained to perform their tasks. This way capacities and capabilities for implementation of energy efficiency projects are ensured. Additionally, they need to be supported by appropriate ICT tool for continuous collection, storage, monitoring and analysis of data on energy consumption. Moreover, energy management team is also responsible for further educational and promotional activities to change employees' behaviour and attitudes towards energy consumption at the work place and for initiating green public procurement activities to stimulate market transformation by utilizing public sector's huge purchase power. And last, but not the least, energy management teams, especially those established within pubic sector (i.e. local authorities) are reaching out to the citizens by publicly announcing their activities and by providing advisory services. This comprehensive process of energy management system introduction is shown in the Fig. 12. Although it shows the process applied in the cities, it could be easily adjusted for business sector as well. Once it is understood that policy implementation is happening locally, capacitating both public and commercial business market players for implementing energy efficiency policy through systematic introduction of energy management practices becomes the key to the policy success. Another look at the Fig. 8 reminds us that implemented projects are only vehicle that deliver actual energy consumption reductions and they appear merely like a drops at the end of pipeline that involves huge number of actors, actions, barriers and instruments to overcome them. Without strong, focused, competent and effective capacities for implementing energy

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efficiency policies it is unlikely to expect that projects would flow from the pipeline and that the targets would be delivered.

Fig. 12. Energy management process in a city (Note: The scheme is applied in the cities of the Republic of Croatia. The process is easily adjusted for business sector.) (Morvaj et al., 2008)

5. Evaluating energy efficiency policy: measurement and verification (M&V) 5.1. General issues on policy evaluation In the energy efficiency policy cyclic loop policy evaluation has an essential position, although it might not appear so. Namely, evaluation procedures are at the same time an integral part of policy design phase as well as both parallel and consecutive activity to policy implementation. The first step in policy design shall be establishment of a plausible theory on how a policy instrument (or a package of instruments) is expected to lead to energy efficiency improvements (Blumstein, 2000). Based on well-reasoned assumptions (theory) policy instruments mix shall be created. Well-reasoned means that strong believe exists that exactly this instrument will lead to cost-beneficial improvements in energy efficiency market performance. Policy makers should have as precise as possible conception of impacts that policy instrument will deliver, prior to its implementation. This is referred to as ex-ante or beforehand policy evaluation during which impacts (social, technological and financial) of policy instruments are forecasted. Expected impact in terms of reduced energy consumption and cost-effectiveness of the instruments are evaluated and compared to business-as-usual scenario in which no instruments are applied. However, often policymakers do not have enough experience and knowledge to confirm the established theory is right. Therefore, policymaking has to be publicly open process involving all stakeholders and market actors that could contribute to the overall understanding how the policy instrument is intended to work.

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Unlike ex-ante evaluation of a policy, ex-post approach is applied after a certain time of the policy instrument implementation, effects of which should be evaluated to answer two key questions (Joosen& Harmelink, 2006):  What was the contribution of policy instrument in the realisation of policy targets (effectiveness of policy instruments)? o Effectiveness of a policy instrument is measured as its net impact in the relation to the policy target set in the design phase. Net impact is equal to the difference between amount of energy used prior and after instrument is implemented. These are net energy savings but also related net CO2 emission reductions that can be attributed to specific energy efficiency instrument taking free rider, spill over, rebound effect and other possible effects into account. Net impact is determined according to the previously defined baseline scenario.  What was the cost effectiveness of policy instruments, and could targets have been reached against lower costs? o Cost effectiveness is the ratio between the additional costs caused by the instrument for the end-user, the society as whole or the government, and the net impact of the investigated instrument. Government costs are related to implementation, administration, enforcement of regulations, monitoring and evaluation, subsidies and tax relieves. In other words, cost effectiveness is used to determine how well public money is used to achieve socially beneficial goals. For end-users costs are determined by energy price, marginal investment and marginal operation and maintenance costs of energy efficiency measure. However, instruments of energy efficiency policies might have other effects as well, so the third question it should be raised is:  What other impacts did the policy achieved outside its main realm? o Most usually mentioned side effects of energy efficiency policy are environmental benefits and creation of new jobs, which are a positive effects in terms of ecological, social and economic stability and progress. However, sometimes negative effects are also possible to appear. E.g. CFLs are using far less energy and have longer life time and in a world's combat against climate change they are now starting to completely replace "old" incandescent light bulbs. However, CFLs do bring some other hazards, like small amount of highly toxic mercury they contain. Policy makers have to be aware of these relationships and often trade-offs have to be done - in this case, the trade-off has to be done between efficiency and potential health risk. Answering these questions is referred as ex-post evaluation. It goes beyond evaluation of final delivered energy savings and tries to reveal success and failure factor enhancing in that way our knowledge about market performance. Enhanced knowledge gives the opportunity to improve effectiveness of policy instruments and to redefine our policy. Here both qualitative and quantitative assessments are needed and should be preferably supported by empirical data about policy performance. The backbone is cause-impact relationship, supplemented by indicators that measure the existence of cause-impact relationship, then failure and success factors should be listed (qualitative) and relationships with other policy instruments should be emphasised (other instruments can enhance or mitigate the impact of analysed instrument). In evaluation process empirical data are also very important as they are additional and often the only indicators of certain instruments impacts.

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Both ex-ante and ex-post evaluation need to be supported with quantitative data, i.e. with data on energy efficiency improvements actually realised by implementation of policy instruments and energy efficiency improvement projects. The tools used for this purpose are referred to as measurement and verification (M&V) of energy savings. M&V is absolutely crucial part of any energy efficiency policy – it captures the overall improvement in energy efficiency and assesses the impact of individual measures. M&V procedures include two major methodological approaches: top-down and bottom-up. Both approaches must be combined to appropriately and as exact as possible evaluate the success of national energy efficiency policy and the magnitude of energy efficiency improvement measures’ impact. Both approaches will be briefly explained hereafter, although it has to be emphasised that the detailed elaboration of M&V principles goes far beyond the scope of this chapter. 5.2. Top-down M&V methods A top-down calculation method means that the amount of energy savings is calculated using the national or large-scale aggregated sectoral levels of energy saving as a starting point. This is purely statistical approach, often referred to as “energy efficiency indicators” because it gives an indication of developments. Top-down methodology is based on collection of extensive data sets for not only energy consumption but also for various factors influencing it, and on calculation and monitoring of energy efficiency indicators. There are six types of indicators most commonly used. These are as follows1. 1. Energy intensity – ratio between an energy consumption (measured in energy units: toe, Joule) and an indicator of activity measured in monetary units (Gross Domestic Product, value added). Energy intensities are the only indicators that can be used every time energy efficiency is assessed at a high level of aggregation, where it is not possible to characterize the activity with a technical or physical indicator, i.e. at the level of the whole economy or of a sector. 2. Unit consumption or specific consumption – relates energy consumption to an indicator of activity measured in physical terms (tons of steel, number of vehicle-km, etc.) or to a consumption unit (vehicle, dwelling …). 3. Energy efficiency index (ODEX) – provides an overall assessment of energy efficiency trends of a sector. They are calculated as a weighted average of detailed sub-sectoral indicators (by end-use, transport mode...). A decrease means an energy efficiency improvement. Such index is more relevant for grasping the reality of energy efficiency changes than energy intensities. 4. Diffusion indicators – there are three types of such indicators: (i) market penetration of renewables (number of solar water heaters, percentage of wood boilers for heating, etc.); (ii) market penetration of efficient technologies (number of efficient lamps sold, percentage of label A in new sales of electrical appliance, etc.); (iii) diffusion of energy efficient practices (percentage of passenger transport by public modes, by non motorised modes; percentage of transport of goods by rail, by combined rail-road transport, percentage of efficient process in industry, etc.). Diffusion indicators have been introduced to complement the existing energy 1 These indicators are developed within ODYSSEE project and are used Europe- wide. More can be found at: http://www.odyssee-indicators.org/

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efficiency indicators, as they are easier to monitor, often with a more rapid updating. They aim at improving the interpretation of trends observed on the energy efficiency indicators. 5. Adjusted energy efficiency indicators – account for differences existing among countries in the climate, in economic structures or in technologies. Comparisons of energy efficiency performance across countries are only meaningful if they are based on such indicators. External factors that might influence energy consumption include: (a) weather conditions, such as degree days; (b) occupancy levels; (c) opening hours for non-domestic buildings; (d) installed equipment intensity (plant throughput); product mix; (e) plant throughput, level of production, volume or added value, including changes in GDP level; (f) schedules for installation and vehicles; (g) relationship with other units. Some of these factors are relevant for correction of aggregated indicators, while some are to be used for the individual facilities in which energy efficiency measures are implemented. 6. Target indicators – aim at providing reference values to show possible target of energy efficiency improvements or energy efficiency potentials for a given country. They are somehow similar to benchmark value but defined at a macro level, which implies a careful interpretation of differences. The target is defined as the distance to the average of the 3 best countries; this distance shows what gain can be achieved. The main advantages of the usage of top-down methods is their simplicity, lower costs and reliance on the existing systems of energy statistics needed for development of a country's energy balance. On the other hand, these indicators do not consider individual energy efficiency measures and their impact nor do they show cause and effect relationships between measures and their resulting energy savings. Developing such indicators requires huge amount of data (not only energy statistics, but whole set of macro and microeconomic data that are influencing energy consumption in all end-use sectors is needed), and data availability and reliability are often questionable in practice, sometimes leading to the huge need for modelling and expert judgement to overcome the lack of data. Nevertheless, energy efficiency indicators are inevitable part of energy efficiency evaluation process (both ex-ante and ex-post) as they are the only means to benchmark own performance against the performance of others, to reveal the potentials and help determine policy targets, to quantify the success/failure of the policy instruments and to track down the progress made in achieving the defined targets. 5.3. Bottom-up M&V methods A bottom-up M&V method means that energy consumption reductions obtained through the implementation of a specific energy efficiency improvement measure are measured in kilowatt-hours (kWh), in Joules (J) or in kilogram oil equivalent (kgoe) and added to energy savings results from other specific energy efficiency improvement measures to obtain an overall impact. The bottom-up M&V methods are oriented towards evaluation of individual measures and are rarely used solely to perform evaluation of overall energy efficiency policy impacts. However, they should be used whenever possible to provide more details on performance of energy efficiency improvement measures. Bottom-up methods include mathematical models (formulas) that are specific for every measure, so only the principle of their definition will be briefly explained hereafter.

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M&V approach boils down to the fact that the absence of energy use can be only determined by comparing measurements of energy use made before (baseline) and after (post-retrofit) implementation of energy efficiency measure or expressed in a simple equation: Energy Savings = Baseline Energy Use - Post-Retrofit Energy Use ± Adjustments

(2)

The baseline conditions can change after the energy efficiency measures are installed and the term "Adjustments" (can be positive or negative) in equation (2) aiming at bringing energy use in the two time periods (before and after) to the same set of conditions. Conditions commonly affecting energy use are weather, occupancy, plant throughput, and equipment operations required by these conditions. These factors must be taken into account and analysed after measure is undertaken and adjustments have to be made in order to ensure correct comparisons of the state pre- and post-retrofit. This kind of M&V scheme (often referred to as ex-post) may be very costly but they guarantee the detections of real savings. The costs are related to the actual measurement, i.e. to the measurement equipment. To avoid a large increase in the M&V costs, only the largest or unpredictable measures should be analysed through this methodology. Individual energy efficiency projects might also be evaluated using well reasoned estimations of individual energy efficiency improvement measures impacts. This approach (ex-ante) means that certain type of energy efficiency measure is awarded with a certain amount of energy savings prior to its actual realisation. This approach has significantly lower costs and is especially appropriate for replicable measures, for which one can agree on a reasonable estimate. There are also some "hybrid" solutions that combine ex-ante and expost approaches in bottom-up M&V. This hybrid approach is often referred to as parameterised ex-ante method. It applies to measures for which energy savings are known but they may differ depending on a number of restricted factors (e.g. availability factor or number of working hours). The set up of a hybrid approach can be more accurate than a pure ex-ante methodology, without a substantial increase of the M&V costs. 5.4. Establishing evaluation procedures supported by M&V The success of national energy efficiency policy has to be constantly monitored and its impact evaluated. Findings of evaluation process shall be used to redesign policies and enable their higher effectiveness. Regardless to its importance, policy evaluation is often highly neglected. Policy documents are often adopted by governments and parliaments and afterwards there is no interest for impacts they have produced. Therefore, setting up the fully operable system for evaluation of energy efficiency is a complex process, which requires structural and practice changes among main stakeholders in policy making. Additionally, it has to be supported by M&V procedures, which require comprehensive data collection and analysis systems to develop energy efficiency indicators that will quantify policy effects.

6. Conclusion Evidently, energy efficiency policy making is not one-time job. It is a continuous, dynamic process that should create enabling conditions for energy efficiency market as complex

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system of supply-demand interactions undergoing evolutionary change and direct that change toward efficiency, environmental benefits and social well-being. However, there are number of barriers preventing optimal functioning of energy efficiency market, which should determine the choice of policy instruments. Policy instruments have to be flexible and able to respond (adapt) to the market requirements in order to achieve goals in the optimal manner, i.e. to the least cost for the society. Due to fast changing market conditions, Policy instruments can no longer be documents once produced and then intact for several years. Continuous policy evaluation process has to become a usual. Future research work to support policy making shall be exactly directed towards elaboration of methodology that will be able to qualitatively and quantitatively evaluate effectiveness and cost-effectiveness of policy instruments and enable selection of optimal policy instruments mix depending on current development stage of the energy efficiency market. Evaluation procedures will advance and deepen our knowledge on success or failure factors of energy efficiency policy. The analysis of current situation shows that policies world-wide tend to fail in delivering desired targets in terms of energy consumption reduction. The main reason lies in the lack of understanding and focus on implementing adequate capacities, which are far too underdeveloped, insufficient and inappropriate for ambitious goals that have to be achieved. It has to be understood that policy implementation will not just happen by it self, and that capacities and capabilities in all society structures are needed. Embracing full-scale energy management systems in both public service and business sector can make the difference. Additionally, with the positive pressure from civil society organisations and media, understanding the interdependences of energy and climate change issues will improve, gradually changing the society's mindset towards higher efficiency, and eventually towards the change of lifestyle.

7. References Morvaj, Z. & Bukarica, V. (2010). Immediate challenge of combating climate change: effective implementation of energy efficiency policies, paper accepted for 21st World Energy Congress, 12-16 September, Montreal, 2010 Morvaj, Z. & Gvozdenac, D.(2008). Applied Industrial Energy and Environmental Management, John Wiley and Sons - IEEE press, ISBN: 978-0-470-69742-9, UK Dennis, K. (2006). The Compatibility of Economic Theory and Proactive Energy Efficiency Policy. The Electricity Journal, Vol. 19, Issue 7, (August/September 2006) 58-73, ISSN: 1040-6190 European Commission. (2006). Action Plan for Energy Efficiency COM(2006)545 final, Brussels Eurostat. (2009). Energy, transport and environment indicators, Office for Official Publications of the European Communities, ISBN 978-92-79-09835-2, Luxembourg European Environment Agency. (2009).Annual European Community greenhouse gas inventory 1990–2007 and inventory report 2009, Office for Official Publications of the European Communities, ISBN 978-92-9167-980-5, Copenhagen European Commission. (2009). Draft Communication from the Commission to the Council and the European Parliament: 7 Measures for 2 Million New EU Jobs: Low Carbon Eco Efficient & Cleaner Economy for European Citizens, Brussels

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Bukarica, V.; Morvaj, Z. & Tomšić, Ž. (2007). Evaluation of Energy Efficiency Policy Instruments Effectiveness – Case Study Croatia, Proceedings of IASTED International conference “Power and Energy Systems 2007”, ISBN: 978-0-88986-689-8, Palma de Mallorca, August, 2007, The International Association of Science and Technology for Development Briner, S. & Martinot, E. (2005). Promoting energy-efficient products: GEF experience and lessons for market transformation in developing countries. Energy Policy, 33 (2005) 1765-1779, ISSN: 0301-4215 Vine, E. (2008). Strategies and policies for improving energy efficiency programs: Closing the loop between evaluation and implementation. Energy Policy, 36 (2008) 3872– 3881, ISSN: 0301-4215 Bulmstein, C.; Goldstone, S. & Lutzenhiser, L. (2000). A theory-based approach to market transformation, Energy Policy, 28 (2000) 137-144, ISSN: 0301-4215 Paskaleva, K. (2009). Enabling the smart city: The progress of e-city governance in Europe. International Journal of Innovation and Regional Development, 1 (January 2009) 405– 422(18), ISSN 1753-0660 Stanislaw, J.A. (2008). Climate Changes Everything: The Dawn of the Green Economy, Delloite Development LCC, USA Morvaj, Z. et al. (2008). Energy management in cities: learning through change, Proceedings of 11th EURA conference, Learning Cities in a Knowledge based Societies, 9-11 October 2008, Milan Joosen, S. & Harmelink, M. (2006). Guidelines for the ex-post evaluation of 20 energy efficiency instruments applied across Europe, publication published within AID-EE project supported by Intelligent Energy Europe programme.

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Energy growth, complexity and efficiency

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x2 Energy growth, complexity and efficiency Franco Ruzzenenti* and Riccardo Basosi*°

*Center for the Studies of Complex Systems, University of Siena °Department of Chemistry, University of Siena Italy 1. Introduction Over the last two centuries, the human capacity to harness energy or transform heat into work, has dramatically improved. Since the first steam engine appeared in Great Britain, the first order thermodynamic efficiency (the rate of useful work over the heat released by the energy source) has soared from a mere 1 % to the 40 % of present engines, up to the 70% of the most recent power plants. Despite this efficiency revolution, energy consumption per capita has always increased (Banks, 2007). The economy and society have undeniably faced an expanding frontier, and both household and global energy intensities have commonly been linked to economic growth and social progress. The rising issue of energy conservation has prompted us to consider energy efficiency as more than merely a characteristic of economic growth, but also as a cause (Ayres and Warr, 2004). We thus wonder if it is possible to increase efficiency, reduce global energy consumption, and foster economic development within an energy decreasing pattern, by separating efficiency and energy growth. In other words, by reducing efficiency positive feed-backs on the system’s energy level (Alcott, 2008). In 1865, the economist Stanley Jevons was the first to point out the existence of a circular causal process linking energy efficiency, energy use, and the economic system. Jevons was convinced that efficiency was a driving force of energy growth and highlighted the risk associated with an energy conservation policy thoroughly committed to efficiency1. Recently the Jevon’s paradox has been approached in the field of Economics and termed “rebound effect”. It has been the subject of articles, research, as well as a great deal of controversy over the last two decades (Schipper, 2000). Although many economists are still sceptical as to its actual relevance, most of them have agreed on the existence and importance of such an effect. Some are deeply concerned (Khazzoum, 1980, Brookes 1990, 1

“It is very commonly urged, that the failing supply of coal will be met by new modes of using it efficiently and economically. The amount of useful work got out of coal may be made to increase manifold, while the amount of coal consumed is stationary or diminishing. We have thus, it is supposed, the means of completely neutralizing the eveils of scarce and costly fuel. But the economy of coal in manufacturing is a different matter. It is a wholly confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is the truth (Jevons, 1965).”

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Saunders, 2000, Herring, 2006) about the overall net effect and its capacity to counterbalance the gains due to efficiency. Others, however, still believe in the net benefit of energy policies focused on developing energy efficiency, although they admit the burden of having to pay a loss of savings (Shipper and Haas, 1998; Washida, 2004; Grepperud & Rasmussen, 2003). The most accurate and simple definition of rebound effect is: a measure of the difference between projected and actual savings due to increased efficiency (Sorrell and Dimitropoulos, 2007). Three different kinds of rebound effects are now widely used and accepted(Greening and Greene,1997): 1. Direct effects: those directly linked to consumer behaviour in response to the more advantageous cost of the service provided. They depend on changes in the final energy use of appliances, devices or vehicles (i.e. if my car is more efficient, I drive longer). 2. Indirect effects: those related to shifts in purchasing choices of customers, either dependent on income effects or substitution effects, which have an ultimate impact on other energy services (i.e. new generation engines are economical, then I buy a bigger car or I spend the money saved for an air conditioner). 3. General equilibrium effects: changes in market demands as well as in relative costs of productive inputs that ultimately have a deep impact in the productive structure, possibly affecting the employment of energy as a productive factor (i.e. the well known substitution of capital to labour, subsequent to a rise of labour costs, is otherwise an increase of the energy intensity of the system. Labour cost may increases relative to a subsidiary process that employs more energy to run). The above classification displays the circular feedback process’s (increasing) time lag scheme, beginning with a quick response, the altered use of energy devices due to changes in energy costs, followed by a slower mechanism, changes in purchasing choices, and finally, the long term restructuring process affecting economic factors. While direct and indirect effects have found considerable attention in the literature, general equilibrium effects remain relatively unexplored due to the uneasiness of their time scale and the variety of involved variables (Binswanger, 2001)2.

2. The economic approach to the rebound effect However paradoxical the rebound effect may seem, it can be explained by classic economic theory. Energy is a derived demand because it is not the actual good purchased, but a means by which a good or a service is enjoyed. Thus, technology that is able to reduce the amount of energy employed by good or service lowers the cost of that item. It is said that efficiency improvements reduce the implicit price of energy services and, according to the basic theory of market demands, the amount of goods consumed rises when prices decrease. Happy with this explanation, economic theory focused on measuring and forecasting the rebound effect. Both econometric models and neoclassical forcasting models have been 2

“Third, changes in the prices of firms’ outputs and changes in the demand for inputs caused by income and substitution effects will propagate throughout the economy and result in adjustments of supply and demand in all sectors, resulting in general equilibrium effects. By taking care of the income effect, we also include the indirect rebound effect in our analysis, but we still neglect general equilibrium effects (Binswanger, 2001).

Energy growth, complexity and efficiency

29

developed that exhibit sound results, except for the third kind of effect, that unfortunately presents many features unfit for these models (Saunders, 1992; Greening and Greene, 1997; Binswanger, 2001; Sorrell, 2009). Forecasting models are mainly based on Cobb-Douglas production functions, with three factors of production (capital, labour, energy), and which derive market demands for these factors. Since the first attempts, calculations confirmed the existence of the effect under the assumption of constant energy prices (Saunders, 1992). Econometric based research also verified the relevance of the rebound effect and further provided valid measures of the effect in a variety of economic sectors. Such measures mainly utilize the relative elasticities of demand curves. Demand curves are built on statistical regressions in prices and quantities of goods, while elasticity is a measure of the sensitivity in demand to the variation of a good’s price. Although these models may be accurate, they are all single good or service designed and are consequently viable only for the detection of direct effects. Other models based on substitution elasticities between goods or factors as well as income elasticities have addressed indirect effects (Greening and Greene, 1997). Such contributions brought the level of detection to a whole sector of an economy or to a variety of aspects related to the process of substitution highlighted in the rebound effect like the role of timesaving technologies and their impact on energy intensities (Bentzen, 2004; Binswanger, 2001). Nevertheless, very few attempts have been made to evaluate general equilibrium effects, a task which entails the recognition of the main connecting variables of an economy, spread over a long period of time. These contributions, however, fail to describe and explain major structural changes in the productive systems that cause discontinuity in the economic relations among variables. All these models are, in fact, based on a stationary framework, and therefore neglect evolutionary changes that heighten the developing pattern of an economy (Dimitropoulos, 2007). As a result of being the first who introduced the paradox behind the development of efficiency, Jevons’ work has to be considered a landmark in this matter, for he was able to trace a line that goes beyond the mere economical, or the implicit price mechanism, explanation. He thought that any technological improvement rendering the energy source more economical would stimulate the demand for energy. Furthermore Jevons had some advanced and valuable intuitions about the role of energy sources in the economic development, as well as about the dynamic between technology, energy and the economy that were too often neglected by modern economists. His contributions are summarized as follows: 1. Fuel efficiency affects market size and shape, and not just a process of substitution among factors. He noticed that both time scale and space scale of travels changed with engine technologies making new markets or new places reachable3. 2. Features of energy sources other than efficiency are relevant for economic purposes like energy intensity and time disposal (power). He argued that what made steam 3

Such structural changes are unfit for common, wide spread modeling approaches. Is noteworthy that when Jevons was developing his analysis, consumer theory was far to come and main sectors were those of steal, mining and machinery industries. Economy was chiefly engaged in building his back bone and changes at any rate were basically structural. His view of economic processes was consequentially affected by that turmoil and can be considered, to a certain extent, evolutionary. Shipper has raised the attention on structural changes, which are, according to his opinion, hardly detectable but very important in energy demand long term pattern (Shipper and Grubb, 2000).

30

Energy Efficiency

vessels more economical was neither fuel efficiency (wind power is more efficient) nor unit costs (wind vessels are almost costless), but instead the availability and disposal of coal as an energy source which had an incomparable positive impact on the capital return cycle. 3. A sink or a flux of free energy becomes an energy source when there is an exploiting technology and an economic need forward. He argues that from the beginning onward, a developing process of energy sources has a fundamental role as an economic driving force and not vice versa. In other words, when economic needs are compelling, technology development is significantly accelerated and as a result, feeds back to the whole economic system. 4. Prosperity is dependent on economical energy sources, and economic development is mainly shaped by energy sources and its quantity4. However pessimistic we may consider this statement, Jevons meant to call for an economical austerity in order to prevent society form a hard landing due to the running out of low cost coal5. He claimed that was more recommendable a stationary economy together with social progress. What we can therefore gain from his teachings is that there is an inner tendency of an economy to render energy sources more economical and that this is the true driving force of economic development6. Thus, for Jevons, societal development—civilization—is “the economy of power” or the constant strain on humanity of harnessing energy in a productive way, and its “history is a history of successive steps of economy (energy efficiency, n.d.r.).” The incremental process 4

“We may observe, in the first place, that almost all the arts practiced in England before the middle of the eighteenth century were of continental origin. England, until lately, was young and inferior in the arts. Secondly, we may observe that by far the grater part of arts and inventions we have of late contributed, spring from our command of coal, or at any rate depend upon its profuse consumption” (Jevons, 1965).

5

A misleading, wide spread, opinion is that Jevons skepticism was misjudged and the rising age of oil gave proof of it; but he clearly foresaw the drawbacks of such a solution: “Petroleum has, of late years, become the matter of a most extensive trade, and has been found admirably adapted for use in marine steam-engine boilers. It is undoubtedly superior to coal for many purposes, and is capable of replacing it. But then, What is Petroleum but Essence of Coal, distilled from it by terrestrial or artificial heat? Its natural supply is far more limited and uncertain than of coal, and an artificial supply can only be had by the distillation of some kind of coal at considerable cost. To extend the use of petroleum, then, is only a new way of pushing the consumption of coal. It is more likely to be an aggravation of the drain then a remedy.” “The steam-engine is the motive power of this country, and its history is a history of successive steps of economy. But every such improvement of the engine, when effected, does but accelerate anew the consumption of coal. Every branch of manufacture receives a fresh impulse-hand labour is still further replaced by mechanical labour, and greatly extended works can be undertaken which were not commercially possible by the use of the more costly steam-power. But no one must suppose that coal thus saved is spared –it is only saved from one use to be employed in others, and the profits gained soon lead to extended employment in many new forms. The several branches of industry are closely interdependent, and the progress of any one leads to the progress of nearly all. And if economy in the past has been the main source of our progress and growing consumption of coal, the same effect will follow from the same cause in the future.”

6

Energy growth, complexity and efficiency

31

of energy efficiency drives more and more energy into the system, but how does it occur? Jevons, in the following passage, provides insight into such a controversial question: Again, the quantity consumed by each individual is a composite quantity, increased either by multiplying the scale of former applications of coal, or finding new applications. We cannot, indeed, always be doubling the length of our railways, the magnitude of our ships, and bridges, and factories. In every kind of enterprise we shall no doubt meet a natural limit of convenience, or commercial practicability, as we do in the cultivation of land. I do not mean a fixed and impassible limit, but as it were an elastic limit, which we may push against a little further, but ever with increasing difficulty. But the new applications of coal are of an unlimited character (Jevons, 1965).

3. Complexity and Efficiency Jevons believed that the natural tendency of economy is to expand linearly, “multiplying the scale of former applications,” up to a limit and then, to overcome such limits, the system works within itself to develop “new applications”. Sketched roughly, the scheme here is: growth-saturation-innovation-growth. Jevons found an unsuspected counterpart in a famous biologist, Alfred Lotka, who was interested in the relation between energy and evolution. Indeed there are several analogies among their theories. Lotka too believed in the need for looking synoptically at the biological system in order to understand the energetics of evolution. Lotka also shares Jevons’ cyclic view of processes, which, in the case of energy “transformers,” he understood to be formed by an alternation growth-limit to growth- evolution- growth7. According to Lotka, the reason why this process was doomed to an ever growing amount of energy flow boiled down to the cross action of selection-evolution on the one hand and the thermodynamics law on the other. In his opinion, evolution is the result of a stochastic process and a selective pressure, and moreover, “the life contest is primarily competition for available free energy.” Thus, selection rewards those species adapted to thrive on a particular substrate, and the growth of such species will divert an increasing quantity of free energy into the biological system. Those species' growth will proceed until the free energy available for that transformation process is completely exploited. The dual action of case and selection will then favor new transformers more efficient in employing the free energy still available. The developmental stages of ecological succession mirror this evolutionary energetic pattern. In the first stage of ecological succession, plant pioneering species dominate, growing rapidly, but inefficiently disposing of resources. In the climax stage,

7

“But in detail the engine is infinitely complex, and the main cycle contains within its self a maze of subsidiary cycles. And, since the parts of the engine are all interrelated, it may happen that the output of the great wheel is limited, or at least hampered, by the performance of one or more of the wheels within the wheel. For it must be remembered that the output of each transformer is determined both by its mass and by its rate of revolution. Hence if the working substance, or any ingredient of the working substance of any of the subsidiary transformers, reaches its limits, a limit may at the same time be set for the performance of the great transformer as a whole. Conversely, if any one of the subsidiary transformers develops new activity, either by acquiring new resources of working substance, or by accelerating its rate of revolution, the output of the entire system may be reflexly stimulated

32

Energy Efficiency

however, the most efficient species in converting resources prevail (Odum, 1997). The following passage stresses this key concept: This at least seems probable, that so long as there is abundant surplus of available energy running “to waste” over the sides of the mill wheel, so to speak, so long will a marked advantage be gained by any species that may develop talents to utilize this “lost portion of the stream”. Such a species will therefore, other things equal, tend to grow in extent (numbers) and its growth will further increase the flux of energy through the system. It is to be observed that in this argument the principle of the survival of the fittest yields us information beyond that attainable by the reasoning of thermodynamics. As to the other aspect of the matter, the problem of economy in husbanding resources will not rise to its full importance until the available resources are more completely tapped than they are today. Every indication is that man will learn to utilize some of the sunlight that now goes to waste (Lotka, 1956). Economy and biology are both evolutionary systems and both can be approached from thermodynamics. By contrast, not all analogies are suitable. Whilst less efficient transformers like bacteria persist together with more evolved vertebrates, hence biosphere makes manifest the entire evolutionary path, economy dismisses obsolete technologies (we don’t see any more steam motive engines around). So, if we abandon inefficient technologies, why isn’t the net effect over consumptions negative? In other words why, if we employ more efficient devices, energy use doesn’t drop? History has so far proved that more efficiency results in more energy consumption. Where does this paradox come from? Is this paradox due to the counteractive effect of population or affluence growth over efficiency or is efficiency evolution the driving factor of economic growth? We will here attempt to show how the causality chain initiate with an efficiency improvement and that growth comes after. Growth featured by those changes affecting the economic system comparable to “new applications of unlimited character” mentioned by Jevons or an “acceleration to the revolution rate of the world engine” envisioned by Lotka. What it is being argued here is that all those changes, or among them, those affecting the structure or delivering brand new technologies into the system, may be regarded as a leap of complexity occurring to the system. Complexity, in the acceptation of organizational complexity, if it was observed as a feature of whatsoever of a system, has always displayed a high energy density rate. This means that growing complexity implies growing energy consumption. That is to say, a more complex system consumes more (more connections, more variety, more hierarchical levels). It is therefore possible that the energy saved by new and more efficient processes is absorbed or perhaps a better word, dissipated, by a more complex system. Energy savings resulting from increased efficiency would then be offset by an organization restructuring process within the system.

4. Evolutionary Pattern We have advanced the hypothesis of the existence of a common, recursive pattern in evolutionary systems. This pattern underlies a broad, complex thermodynamic process involving the entire system and arises from forces embedded within the system. We have described this pattern as the following circular process: growth-saturation-complexity leapgrowth and can be depicted it as a circular process.

Energy growth, complexity and efficiency

33

Fig. 1. Evolutionary Pattern The growth stage relies on the presence of inner forces that drive the system to expand while seeking survival and reproduction. These forces are species (the genome) in the domain of biology, and firms (the capital) in the economy. Although it is clear how these autocatalytic processes cause the system’s expansion, it is less clear how, coupled with efficiency improvements, they can divert more energy into the system or in the words of Lotka, “maximize the energy flow.” It must be kept in mind that neither Lotka nor Jevons claims that the overflow of energy is the actual aim of system components. It is rather a result of their interaction with each other and with the environment. Lotka, for example, believes that two main thermodynamic strategies are adopted by organisms in order to adapt to the environment: maximizing output (power maximum) and minimizing input (efficiency maximum). The former is developed by species thriving in resource abundance and the latter by organisms struggling in scarcity conditions. According to Lotka, by pursuing unexploited free-energy more energy is driven through the system thus maximizing global output. The dichotomy between efficiency and power is therefore quite apparent8. And there is indeed something well founded in this revelation, which is rooted in thermodynamics. The antagonism between efficiency and power is less evident from a thermodynamics perspective, meaning that if other factors are left unchanged, an efficiency improvement always leads to empowerment. The misunderstanding and thereby the paradox of efficiency comes from two major misconceptions, which can be outlined as follows:  Thermodynamic efficiency, from the Carnot Engine onward, concerns the conversion of heat into work, not just the mere transformation of one form of energy to another.  Efficiency, as a rate between output and input or benefits and costs, pertains to a static analysis despite the fact that the conversion process actually takes place in time and therefore costs and benefits also depend on the time elapsed. 8

There is a simplification of Lotka’s vision of the energetics of evolution that states that two strategies would top evolutionary thermodynamics: one that maximizes work over time (power) in the case of resource abundance and another that minimizes energy consumed per for amount of work delivered (efficiency) in the case of scarcity. These two strategies have been summarized in the “maximum power principle,” despite Lotka himself being reluctant to adopt any lofty and ambitious term like “principle” for his thinking. Moreover, in this formulation, scarcity and abundance are unrelated whatsoever to magnitude, while Lotka clearly stresses what scarcity must be compared to: the ability of a transformer to get hold of free energy and its growing rate. What are indisputably scarce or plenty are nutrients, row materials or water, which eventually affect energy efficiency.

34

Energy Efficiency

The first statement assumes the custom of considering conversion rates, such as the transformation of chemical energy into heat, as thermodynamic efficiencies. As previously noted, most of the controversies surrounding the rebound effect in the residential sector arise from the misleading concept of efficiency. The rate of transformation of chemical energy into heat in e.g. a bomb calorimeter is a calorie while out of the laboratory, it is a thermal efficiency, and should not be considered a thermodynamic efficiency because no work is involved9. The theoretical apparatus we have so far employed is therefore inapplicable. Only work needs an entropy change into the (work) reservoir in order to be dissipated while a heat sink is of unlimited disposal to the environment. In other words, the system’s structure needs to change in order to dissipate (more) mechanical work, but not the same can be said for heat. This kind of efficiency, known as thermal efficiency, has much more to do with squandering. When a process becomes more thermodynamically efficient, more work is extracted from the same amount of energy (heat) and when it becomes more thermally efficient, less heat for our purpose is wasted from a heat source. 4.1 The Time Variable Determines the Efficiency Level In the second statement, the attention is focused on a theoretical aspect that needs a formal treatment to be understood. It is indeed very difficult to intuitively sense that, in physics terms, a system that improves its efficiency also enhances its power. It is even more difficult to see how this can be true if a trade off exists between power maximization and efficiency optimization. A system that maximizes its efficiency actually minimizes its power and vice versa. Thus, if we improve the efficiency, we increase the power. Nevertheless, if we seek the best efficiency, we have to set the minimum power output. Is this a paradox? In a sense, yes, but only if our analysis is oblivious to the passage of time. We have formulated two assertions in apparent contradiction. The first is that when thermodynamic efficiency improves, power increases. This direct relationship is evident by observing the definitions of efficiency and power:

η=

W W ,P= Δt Qh

(1)

As long as the specific consumption—the rate at which the energy source is depleted— remains constant, the power increases. It is noteworthy that this relationship strictly relates to the capacity of the system to draw from a particular source. The capacity depends on the specific consumption:

∂ Qh ∂t

(2)

The specific consumption is the rate of depletion of the energy source or the amount of input (fuel) per the unit of time. It reflects the capacity of the system to convey energy 9

Thermodynamic efficiency concerns the transformation of heat into work. Other non-thermodynamic efficiencies are, for example, heat transport and heat regulation or the cinematic chain. Nevertheless, any kind of efficiency can contribute to the overall thermodynamic efficiency, when a work output is obtained out of heat.

Energy growth, complexity and efficiency

35

throughout the process.The second assertion that there exists a trade-off between efficiency and power needs more mathematics to be explained. It will be illustrated by means of a Carnot Cycle, revisited with the addition of the time variable. In the Carnot Cycle, to achieve the maximum efficiency, the isothermal expansion and compression (Figure 2), need to occur at an infinitely slow speed in order to maintain an infinitesimal temperature gradient between the working substance (Thw, Tcw) and the heat reservoirs (Th, Tc). Under these circumstances, the power of the machine approaches zero since it takes infinite time to produce a finite amount of work. To speed up the process, we need to increase the gradient since the heat transfer rate is proportional to it. To thereby get more than an infinitesimal amount of power from a Carnot Engine, we have to keep the temperature of its working substance below that of the hot reservoir and above that of the cold reservoir.

Fig. 2. Carnot Cycle The more we increase the two gradients, the closer the extreme temperatures of the working substance. Ultimately, the two isothermal stages take place with no change in the temperature of the working substance. Heat flows directly from the hot source to the cold sink and no work is done. Hence the power output is zero and the engine has zero efficiency as well. In this model, we consider a Carnot Engine with a working substance absorbing heat from the hot source at Thw and releasing heat to the cold source at Tcw. Under most circumstances, the rates of heat transfer will be proportional to the temperature gradients. We assume the constant of proportionality (K –meaning that heat absorption/release occurs in the same conditions) and the same ∆t for the expansion and the compression10. We also assume that the two adiabatic transformations remain unaltered. We now have the following equations describing the once isothermal processes:

Qh = k Th  Thw  Δt1 10

(3)

These assumptions can be abandoned without changing the results of the model, see Curzon and Ahlborn (Curzon and Ahlborn, 1975).

36

Energy Efficiency

Qc = k(Tcw  Tc ) Δt2

(4)

Th= temperature of the hot source, Tc=temperature of the cold source, Thw=max temperature of the working fluid, Tcw=min temperature of the working fluid Since the remaining two processes are adiabatic, they follow the relation (5):

Qh

T hw

=

Qc T cw

(5)

The power of the system will be defined in equation (6):

P=

W 2Δt

W=Q h− Q c

,

(6)

Δt 1 =Δt 2

(7)

The maximization of the power, as a function of Thw, the hotter working temperature, will give the following result for the optimum power output:

T hw =

1 Th + ThTcw 2





(8)

at a corresponding efficiency of

η= 1

Tc Th

(9)

It will be useful to do a variables’ substitution to depict the trade off so we now fix x=Tcw/Thw. According to this model, the efficiency-power trade off can be sketched as function of x and whereby Carnot efficiency will be represented by curve (10) and power output curve (11):

η= 1− x P=

T  k Tc +Th  Th x  c  x  4 

(10) (11)

The two curves can be plot in a graph, assuming Th and Tc of 300 and 25 degree Celsius; and fixing k at 0.05 (Fig.3). To reach the maximum theoretical efficiency (η for the isothermal transformation) the system must approach thermal equilibrium and therefore maximum

Energy growth, complexity and efficiency

37

slowness. Since it arises from power maximization, the optimal output will be somewhere between theoretical maximum efficiency and zero efficiency and it will only be determined by the sources’ temperatures (Th and Tc). So for every boundary condition in a Carnot Cycle, there is a single optimal value of output. Even if we abandon most of the abstract assumptions about the Carnot Cycle thus introducing further irreversibility, the peak of the curve will probably shift, but the trade off is unavoidable. We have to set the engine at either maximum efficiency or maximum power. “However, when the cost of building an engine is much greater than the cost of fuel (as is often the case), it is desirable to optimize the engine for maximum power output, not maximum efficiency (Schroeder, 2000).”

Fig. 3. Power-efficiency trade off The power maximization will lead to sub-optimal efficiency (with respect to Carnot efficiency) which depends on sources’ temperatures with the explicit relation ( 9) while Carnot efficiency is:

ηCarnot= 1−

Tc Th

(12)

It is noteworthy that such an efficiency level seems to be much closer to the running efficiency of most of energy converting sources than the Carnot efficiency (Table 1). 4.2 Efficiency improvement and power enhancement We can further assume that efficiency improvements also apply to engine parts, in addition to working temperatures11. Any technical improvement concerning the material employed 11 If we consider sources’ temperature changes, we return to the dominion of Carnot efficiency while if we take into account working temperatures, we resort to the efficiency-power trade off sketched by the model.

38

Energy Efficiency

or the reduction of friction would lead to a higher K and a better (faster) heat transfer across the machinery12. Since K does not affect the output regulation (the maximum value is not dependent on K), this will in turn, increase the rate of Qh and the power. According to the value of the maximum power, it is clear that any increase in K (given Th and Tc) will augment the power by a factor of 1/4, shifting the peak upward. More efficiency will therefore lead to higher power. Suppose we want to increase efficiency as much as possible, leading the control parameter K. We may push further K, in order to increase the heat transfer rate and get an higher efficiency, but we will end up moving away from the theoretical maximum efficiency level, toward an higher power output, as it is shown in the animation13. Through this model, we have shown how the efficiency-power paradox is apparent and we have also described the thermodynamic conditions of the efficiency-power trade off. We can thus draw Lotka’s conceptual framework of power maximization versus efficiency optimization in the context of the economy of power. It is, as we have already highlighted, an economic optimization that leads to maximum output14. Whenever the cost of fuel is relatively less constraining than the cost of machinery, power will be maximized. Nevertheless, every efficiency improvement involving technological development will probably lead to a more complex engine (or process) and therefore, will, on the one hand, reduce the relative price of energy, but on the other, raise the cost of the apparatus. This will ultimately amplify the bifurcation and positively feed back to the optimum power level15.

12 The paradoxical effect of increasing both efficiency and power can be easily understood if we think energy as space integral and work as the time integral of force. A process that reduces energy input in less time, increases power, as integrations over the same function are not independent. That is to say: if we use less energy per unit of space, and unit of time, in the same amount space we will save energy, yet in the same time lag we may use more energy!

13Animation

at: http//sciyo.com Concepts of the like of “costs” and “economic optimization” should not be intended in a strict way. Broadly speaking, costs are to be meant as thermodynamic cost. 15 The idea of sub-optimal efficiency level output was investigated in the filed of biological systems. As early as the 1955, Hodum and Pinkerton (Hodum H.T., Pinkerton R., 1955) published an article in which, adopting Lotka approach an vision for life’s energetics, tried to demonstrate that “natural systems tend to operate at that efficiency which produces a maximum power output”. Such efficiency was lower then the maximum attainable and, according to them, was exactly of 50%. “In natural systems there is a general tendency to sacrifice efficiency for power output”. The idea of the 50% set point was based on the finding that most of energy converting systems were featured by coupled antagonists processes. “The essence of biochemical workings of an organism is the coupling of an exergonic catabolism to an endergonic anabolism that results in growth, reproduction and maintenance”. Although this paradigm may account partially or even totally, for the derivation of the 50% value of efficiency, it was a striking intuition. It is remarkable, for example, that in the former model, whereas it is not so evident, there are two counteractive processes: the heat absorption an then heat release. The heat disposal affect the power output as much as the heat intake, as we know empirically, from electric power plants. Thus, this simple thermodynamic model resembles, by this point of view, the “living systems” of Odum theory. Conversely, as already Odum didn’t fail to mention later on (Odum, 1983), the article of Cuzon and Ahlborn of 1975, on which this model is based, gave a sound evidence and a formal basis, to the postulate of the “maximum power principle” 14

Energy growth, complexity and efficiency

39

Power Source

Tc

Th

η (Carnot)

η* (model)

η (observed)

Coal Fired Steam Plant

25

565

64.10%

40%

36.00%

Nuclear Reactor

25

300

48.00%

28%

30%

Geothermal Steam Plant

80

250

32.30%

17,5%

16%

Table 1 Source: Cuzon and Ahlborn, 1975. 4.3 The Case of Trucks The truck industry and therefore, the road freight transport sector, gives a useful example of empowerment brought about by the efficiency improvement of the engine and vehicle technologies. From the late 1970’s onward, efficiency rose steadily as an effect of technology research that tried to overcome the effects of soaring energy costs. Initially, such improvements were employed to reduce consumptions, but later technology development partially addressed power enhancement. Energy efficiency, as measured by fuel economy distance travelled, at constant speed, for unit of fuel consumed, increased since late 1970’s to late 1990’s of about 30%. However, if we rescale fuel economy to the power shift of engines (adjusted fuel economy), we can observe a major change in efficiency (Ruzzenenti and Basosi, 2009a). This is also evident from the comparison of two trends of fuel economy and adjusted fuel economy (fuel economy divided by the engines’ power) for a sample of 97 different European heavy-duty trucks. Initially the two metrics are coupled and show how efficiency was employed to reduce fuel consumption; we can see a dramatic drop in both fuel economy and adjusted fuel economy. Later trends display a sharp bifurcation, from mid 1990’s onward, that explains how efficiency was then employed to enhance power and reduce consumptions (Figure 3)

Fig. 4. Efficiency and power bifurcation in European Truck Industry (Ruzzenenti and Basosi, 2009a)

40

Energy Efficiency

5 Structural Complexity The underlying hypothesis of this work is that higher complexity counterbalances, on a global scale, the effects of higher efficiency on a process scale. It is our general understanding of evolution that selection operates by reward complexity. More complex, in the context of biology is often used as a synonym for fittest in terms of the competition for resources. Technological advances also develop from less to more complex devices. The meaning of complexity has never been questioned, for it has been evident in the semantic of nature or progress since earliest observations. A eukaryotic cell is more complex than a prokaryotic one and a Ferrari F1 is more complex than a Ford T. Under this perspective, complexity is countable, if not measurable, by the number of different components, parts or organs. If we abandon the conviction that progress always evolves toward higher complexity, that is to say, if we relinquish the belief of an immanent trend in nature; or if we are dealing with systems that differ in structure rather than in number of components, how can we apply such well established knowledge? It is beyond the goals of this analysis to establish what complexity is or how it should be approached. The scientific community has been unable to establish or agree on a universal definition or paradigm of complexity and any attempt to univocally measure complexity is therefore doomed to failure16. It will be here assumed that a more complex system has a higher energy density or in other words, consumes more energy per unit of mass and time. There is a great deal of evidence, from biological records to cosmological entities, of such a relationship and therefore we believe it can be considered a reasonable assumption. Indeed, this strongly recursive pattern in nature –linking energy density and compolexity, caused many scientists to think that energy could itself be considered a measure of complexity (Odum H.T., 1996; Odum E.P., 1997; Chaisson, 2001). Let’s assume a more complex system consumes more (per unit of mass and time) and the complexity we refer to, it is a structural or morphological complexity, as we are dealing with systems with undefined boundaries and innumerable components, like the productive and transport systems. The two main assumptions regarding complexity that we are concerned with are: 1. A more complex system consumes more energy per unit of mass and unit of time (higher energy density rate) 2. Structural complexity primarily concerns the components’ organization17 rather than the components’ variety or number

16

“By ‘complexity’, we refer to the term intuitively as used in ordinary discourse, a definition culled from many sources: ‘a state of intricacy, complication, variety, or involvement, as in the interconnected parts of a structure-a quality of having many interacting, different components.’In this work we shall come to identify complexity in two operational ways: as a measure of the information needed to describe a system’s structure and function, or as a measure of the rate of energy flowing through a system of given mass. No attempt is made here to be rigorous with the words ‘order’, ‘organization’, ‘complexity’, and the like; this is not a work of classical philology or linguistic gymnastics. Indeed, no two researchers seem able to agree on a precise, technical definition of such a specious word as complexity, which may be context-dependent in any case (Chaisson, 2001)”.

17 For organization we refer to any system’s components acting or arranged in a cooperative, systematic fashion.

Energy growth, complexity and efficiency

41

Further remarks attain the duality efficiency/complexity. We should bear in mind that while we are referring to energy efficiency improvements, we are dealing with a processscale analysis, whilst the leap in complexity concerns the global-scale analysis. These phenomena are at two different hierarchical levels: 1. Energy efficiency concerns energy converting processes and is therefore at the components level of the system 2. Complexity (structural) concerns the organization of the system and is thus at the global level of the system We try to hereafter relate energy efficiency enhancement to complexity change. To accomplish this, we have to detect changes in system organization that move in the direction of higher complexity. Yet, changes in which system? Since we have been dealing in the case study with truck efficiency, it would make sense to refer to the freight road transport system, but that would be misleading because the goods transport sector is merely a sub-component of the whole productive system. Transport service is just a derivative demand, which means, in economics terminology, that someone wants a good to be moved from one place to another. The shipment is the means, not the goal. Our analysis therefore has to address the productive system in order to detect long term changes in transport demand. Transport demand is derived from the needs of the productive system. The transport system and the productive system, under the scope of present analysis, are two parts of a whole. 5.1 Complexity leap: structural analysis The main feature of the shift from a fordian to a post-fordian system concerns the location of the productive chain. Formerly, the productive chain was set entirely in one site, to which raw materials were delivered and from which products were shipped. From the 1970’s onward, big firms began disassembling the production chain and redistributing it over several scattered structures, belonging to the same company, or, more generally, belonging to other international firms or local producers system. As a matter of fact, the productive chain changed shape thereafter and it changed in such a fashion that the complexity of the structure increased. It can be shown, by means of graph theory, that the post-fordian structure increased in connectivity and path-cycles diversity across its nodes (Ruzzenenti and Basosi, 2008b). Hence the post-fordian structure presents a higher degree of freedom and thus relates to a more complex system. A system with a higher degree of freedom is a more complex system in the sense that, as for any physical system, it has increased multiplicity or number of different available states. In other words, a more complex system has more ways to arrange the components, in this case goods or raw materials, and therefore to dissipate energy. According to the hypothesis here advocated, complexity increases when the system can rearrange its components in such a manner that the number and the path length, or the speed of interactions, will be augmented within the same boundaries18. That is to say, complexity growth consists of an intensive rather than an extensive change, affecting the 18 It noteworthy that, in a network, the number and the path length must be considered intensive features as they can grow without affecting the extension of the network, which is determined eventually only by the number of nodes (components).

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internal structure of the system, which may be expressed by a new arrangement of system components19. This hypothesis expresses view of complexity based on the concept of geometry20. In our opinion the network structure development, that eventually results in complexity growth at any system level, is the outcome of forces (energy influx driven by autocatalytic processes) in the context of hindering boundary conditions. It is the simple growth (in extent and in number of components) the normal behavior. That is to say, without hindering boundary conditions, the system expands its structure, qualitatively unaltered (spatial growth). The system develops in a primary and spatial manner initially, then, when saturation is reached, in a secondary and geometrical (structural) one. It is such geometrical development that enables the system to increase its degree of freedom and to host more energy (or energy density rate) within the same constraints. When this complexity change emerges, the incoming structure, albeit already available to system components, becomes now more probable. The boundary conditions ultimately determine the likelihood of the new structure. It is therefore the role played by saturation in system’s growth that must be addressed in order to understand the surge of complexity leap. After the first oil crisis, worldwide industrial production dramatically decreased. There are many clues, indeed, that industrial production at that time reached a saturation point. Statistics show that between the early 1970’s and 1990’s, a revolution occurred in economic and societal structure that might be considered the end of the industrial age (IEA, 1997). Until that time, linear growth lasted for about 20 years and consisted of a shift in the active population (which was itself growing) from agriculture to industry. It was the nature of the “economic boom”, the linear “growth in extent and numbers” (Lotka, 1956). The birth rate thereafter inverted its trend (also in relation to the average income) and population employed in industry reached a maximum and started decreasing (Ruzzenenti and Basosi, 2009b). Industry received a dramatic set back and consequently began to explore new strategies to reduce labour costs and regenerate production. The structural change we have been describing thus far—the globalization and outsourcing revolution—took between 10 and 15 years to become established and influential. However, after the 1990’s, the growth trend in the industrial sector resumed and the economy retrieved. 5.2 Degree of freedom reduction/increase When analyzing the structural complexity change resulting from globalization, of paramount importance is the shift from a uni-located, national productive chain to one that is pluri-located and international. For those firms relying on external resources to pursue their productive needs, production became less costly, but more subdued due to uncontrollable factors. Part of its activity, formerly controlled managerially and internally, 19 An example in cells is represented by the internal skeleton of microtubules that increase the speed of molecules across the cell compared to a transportation system based on simple diffusion. In ecosystems, furthermore, there are food chains and predator-prey dynamics that represent another “transportation network” over which matter flows faster.

20

According to Lotka, geometry is a prominent feature of thermodynamics of living systems and thus, of a sort completely different from those normally addressed by equilibrium thermodynamics. Whereas the latter mainly deals with “structure-less systems”, of the like of chemical coefficients, the former must deals with the “geometrical features” of the system (Lotka, 1956).

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was then focused on the free market. This shift reduced the stability of the firm and reduced its degree of freedom (choices of allocation). After globalization, firms could explore labour costs according to various national legislations and average incomes. The same occurred for financial and fiscal conditions or the proximity to productive districts. The system (entire market) could thereby reduce production costs by selecting where to set plants or rely on suppliers. It is in this sense that globalization produced the rise of new spatial gradients in the productive system. The whole system thereby increased its degree of freedom. We face therefore the counteractive interplay of degree of freedom, on two hierarchical levels, triggered by a saturation stage. To better stress how this interplay of degree of freedom, working in opposite directions, can be caused by saturation, it is best to approach physical systems for analogies. For example, if we increase the pressure of a gas in a specific volume, we reduce its degree of freedom and it consequently can become a liquid, at certain temperatures. At the same time, when a liquid changes its motion regime, as in Benárd cells, from a pure, random dissipative system (Figure 5A) to a global dissipative one (Figure 5B), which displays features several magnitudes larger than molecules, a superstructure can arise that was previously available, but very unlikely.

Fig. 5. Degree reduction/increase in dissipative structures (Ruzzenenti and Basosi, 2009b) Gravity and viscosity constraints make such a structure, beyond a certain level of energy input, possible. The Benárd cells phenomenon is indeed possible when the gradient temperature and water level thickness are known, but not when the vessel permits the fluid to dissipate heat in random motions. In other words, the boundary conditions together with the pressure imposed upon the system by an increasing energy flux, changes the macrostate (energy density) of the system by modifying its microstates (the molecular motion). The random motion of molecules reflects one gradient, the temperature, which is not spatial (geometrical), while the superstructure is exposed to the spatial gradient. That is to say, while the first gradient is defined by one variable, the latter is described by three variables and probabilities consequently change. Dissipation into one variable is therefore more probable than onto three variables, unless boundary conditions render the former impossible. In Benárd cells, such conditions are exemplified in Van der Waals forces, the low heat capacity of water, and restrained vessel thickness (Chandrasekhar, 1961; Prigogine and Stengers, 1984; Swenson, 1997). The connectivity recasts the same trade off in a network system’s conceptual framework. A network system grows in complication as long as a new

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component is connected on the same hierarchical level and it grows in complexity when a new component is introduced on a higher hierarchy (Allen and Starr, 1982). The emergence of a new hierarchy involves coherent behavior for lower level components to the same extent as molecules in Benárd cells, and most importantly, the onset of a new spatial gradient for the higher component, which must now recognize system boundaries. On a molecular scale, cells in the body behave like a network. From the stand point of the organism, however, they act as a whole unit. Indeed “free” cells in substrates are mainly exposed to chemical gradients (temperature, pressure and gravitational gradients as well), while “embedded” cells in tissues that form organs are described by spatial, three dimensional, gradients. 5.3 Spatial symmetry rupture We believe economic systems (and macroscopic complex systems in general) can exhibit a similar evolutionary pattern: a space symmetry rupture emerges from compelling boundary conditions and increasing energy inflow. In the case of the productive structure’s evolution it can be shown that space was isotropic21 in the former state (fordian) and non isotropic in the latter (post-fordian): a spatial symmetry breaking occurred (Figure 6). What made this spatial gradient rise was a reduction in firms’ degree of freedom production settings, coupled with an energy efficiency leap. More energy was thus available to the system amid a condition of hindering forces applied to its boundaries. Two counteractive forces are beneath a symmetry rupture. In this case the symmetry rupture put a space gradient upon the system, with which it induces its variables (components) to organize themselves. Globalization and outsourcing set production plants in a new, oriented space that was formerly homogeneous. We would like now to clarify the reason why it has been used the word rupture has been used in place of breaking to describe the symmetry change. The concept of “symmetry breaking” applies to the temporal scale, whereas here space symmetry has been considered. That is to say, the time-symmetry concept concerns a sudden change in the developmental path of the system; nevertheless this change affects the system itself, rather than the space of the system. In Prigogine’s paradigm a dynamic system is considered and it is thus described by a dynamic function, whereas, in the symmetry rupture a phase transition rather than a dynamical, however non-linear, change is described22.

21 In other words, there is just one way to go from the periphery to the centre, regardless of the number of nodes considered, while there are many ways to connect the same number of points in the path. Furthermore, the number of different ways increases with the number of points. This does not mean that, in a scattered productive chain, factories (points), are connected randomly, but instead means that there are multiple ways for a chain to develop its pattern and just one for a centralized system. 22 „We see therefore, that the appearance of a periodic reaction is a time-symmetry breaking process exactly as ferromagnetism is a space-symmetry breaking one. [….] To understand at least qualitatively this result let us consider the analogy with phase transitions. When we cool down a paramagnetic substance, we come to the so-called Curie point below which the system behaves like a Ferro magnet. Above the Curie point, all directions play the same role. Below, there is a privileged direction corresponding to the direction of magnetization “(Prigogine, 1977).

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Fig. 6. Spatial symmetry and productive chain (Ruzzenenti and Basosi, 2009b) It is noteworthy that Prigogine used the concept of space-symmetry breaking as a metaphor to introduce the new concept of time-symmetry breaking. Now, we want to retrieve the concept of space symmetry breaking (symmetry rupture in the jargon so far adopted) as we think it is fundamental to understand how evolution may concern the space of the system, rather than the system itself. Furthermore, it should also be noticed that the concept of space-symmetry breaking includes the concept of time-symmetry breaking and not vice versa. 5.4 Time scale and Spatial scale Complex systems display a spatial gradient which is sometimes many orders of magnitude larger than gradients involving the scale of components. This important feature of complexity was first envisaged by Prigogine. Parameters describing dissipative structures, like Bénard cells, are macroscopic compared to parameters describing structures at thermodynamic equilibrium. Indeed, while crystals are described by interactions of the order of 10-10 meter, convective cells display a size of the order of the 10-2 meter (Prigogine and Stengers, 1984). The same can be said for the characteristic time of phenomena. Time scale varies greatly for the above mentioned systems: the vibration period of molecules is of the order of 10-15 seconds whereas convective motions have a period in the order of seconds. It is noteworthy that this scale effect, consequential to the hierarchical leap, seems to be a common feature of all complex systems, spanning from simple, non-living dissipative structures to greatly complex human-made and biological systems. In the case study here presented the magnification of time scale is clearly established in the nature of decision process that characterize the view-point of firms. As long as the entire chain was engulfed in the same firm, if not in the same production plant, any decision inherent to the volume of

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the production was almost readily attainable. Outsourcing, conversely, brought the productive chain outside the firm, making the setting of the plant an endogenous variable and the volume of the production an exogenous variable (or at least a less controllable one). Nevertheless, decisions having to do with production’s settlement develop themselves over a much larger range of time. Obviously, the time lag scales up due to the spatial extent of interactions, which increases many orders of magnitude throughout hierarchy as components’ size remains the same. This is why the time scale is commensurate to the spatial extent of the system. Nevertheless it seems that magnification of the time scale is affected by space in a fashion that is not entirely reducible to an extensive factor. Time scale as it grows displays a cyclic phenomenon which seems to relate to the symmetry property of the space. In mechanics a cyclic system displays properties of invariance that are proportional to the symmetry properties of the space: to every local symmetry there corresponds a conservation law. A conservation law states that some quantity describing a system remains constant throughout its motion; expressed mathematically, the rate of change of its derivative with respect to time is zero. A system that is cyclic exhibits symmetry as if the space was homogeneous. Therefore by means of cyclic patterns, symmetry in space is re-established and growth can develop again in a continuous way. It is needless to emphasize that cycles are a prominent feature of complex systems, regardless of the nature or the scale that is involved.

6. Conclusions In the first part of the chapter the rebound effect -the growing energy use coupled with an efficiency enhancement, was employed to introduce the broader question that relates energy efficiency to energy density rate. It was shown that the paradox partially derives from misconception of energy efficiency and power. It must be firstly conceptually set apart thermodynamic efficiency from other forms of efficiency. It must than bore in mind that thermodynamic efficiency is strictly connected to power, in two ways. On the one hand there is power-efficiency trade-off and evolutionary systems tend to maximize power rather than efficiency. On the other hand, an efficiency enhancement normally leads to a power shift, as a side effect. In the second part of the chapter, we approached the question of the interdependence between efficiency, complexity and energy density, to illustrate how the causality chain can be reversed: efficiency leads to an higher energy density rate and eventually, to a complexity leap. A complexity leap that is underlined by a change in the space of the system. As in a phase transition, space symmetry rupture seems to be an important aspect of complexity change. Symmetry rupture, introducing a new gradient in the system space, allows variables (components) to organize themselves. This new arrangement, on the scale of variables, reduces their degree of freedom, on the scale of the whole system, increases it. The change deeply concerns the structure, therefore the geometry of the system. Between the new and the old structure a topological change occurs. In our opinion, the topology of the system has to be addressed with graph theory. Yet, the transition between the two phases is still an open question and more research is needed. A formal analysis of it should start from recent acquisitions in the field of network theory (Ruzzenenti, Garlaschelli and Basosi, 2010). However, as we tried to illustrate in this chapter, the new arising structure will be more

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complex and more energy intensive. Higher energy density rate will be an outcome of a transition that will maximize links and frequency of interactions. Such a transition lays behind, in our opinion, the so called “rebound effect” (Jevons paradox) and explains why energy efficiency has always led to energy growth. Energy conservation policies should therefore contemplate, together with strategies prompted at fostering energy efficiency, measures directed at balancing the long term positive effect over energy consumptions due to a structural changes in economy.

7. References Alcott B., 2008. The sufficiency strategy: Would rich-world frugality lower environmental impact? Ecological Economics, 6 4, 7 7 0 – 7 8 6 Allen T. H. F., and T. B. Starr. 1982. Hierarchy: perspectives for ecological complexity. University of Chicago Press, Chicago, IL. Ayres R. U., Warr B., 2005. Accounting for growth: the role of physical work. Structural Change and Economic Dynamics ,16, 181–209 Banks F. E., 2007. The political Economy of World Energy: An Introductory Textbook. Singapore and New York, World Scientific. Bentzen J., 2004. Estimating the rebound effect in US manufacturing energy consumption, Energy Economics, 26, 123-134. Binswanger M., 2001. Technological progress and sustainable development: what about the rebound effect? Ecological Economics 36 (2001) 119 – 132 Brookes, Leonard, 1990. The greenhouse effect: the fallacies in the energy efficiency solution. Energy Policy 18 (2), 199–201. Chaisson E., 2001. Cosmic Evolution-The Rise of Complexity in Nature, Harvard University Press, Cambridge, Massachusetts, London, U.K., 2001. Chandrasekhar, S. 1961. Hydrodynamic and hydromagnetic stability. Oxford, Clarendon. Curzon F., Ahlborn B., 1975. Efficiency of a Carnot Engine at Maximum Power Output. American Journal of Physics 41, 22-24 (1975). Dimitropoulos J., 2007. Energy productivity improvements and the rebound effect: An overview of the state of knowledge. Energy Policy 35, 6354–6363. Geening, Lorna A., Greene, David L., Difiglio, Carmen, 2000. Energy efficiency and consumption—the rebound effect—a survey. Energy Policy 28 (6/7), 389 – 401. Grepperud S., Rasmussen I. 2003. General equilibrium assessment of rebound effects, Energy Economics, 2003. 189–203. Herring H., Energy efficiency—a critical view. Energy 31 (2006) 10–20. IEA, Indicators of energy use and efficiency, 1997. IEA Energy Statistics Statistics on the Web: http://www.iea.org/statist/index.htm Jevons, W. Stanley, The coal question – An Inquiry Concerning the Progress of the Nation, and the Probable Exhaustion of our Coal-mines, M.A., ll.D., F.R.S., Augustus M. Kelley Publisher, New York, 1965 Khazzoom, J.D., 1980, “Economic Implications of Mandated Efficiency in Standards for Houshold Appliances.” The Energy Journal, Vol.1, No.4, pp21-40. Kummel, R., 1989. Energy as a factor of production and entropy as a pollution, Ecological Economics, 1 (1989) 161-180.

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Lotka A., 1956. Elements of Mathematical Biology, Dover Publications, Inc, New York. (first publication: elements of physical biology, The Williams and Wilkins Co., Inc, 1924). Odum E.P., 1997. Ecology: A Bridge Between Science and Society, Sinauer Associates, Inc., Publishers. Sunderland, Massachusetts 01375 U.S.A. Odum H.T., 1955. The speed regulation: the optimum efficiency for maximum power output in physical and biological systems. American Scientist. 43 (1955), 331-343. Odum H.T., 1983. Maximum Power and Efficiency: a rebutal, Ecological Modelling, 20, 7182. Odum H.T., 1996. Environmental Accounting. Emergy and Environmental Decision Making. John Wiley & Sons, Inc., New York, USA. Prigogine I., G. Nicolis, A. Babloyantz, 1972, Thermodynamics of evolution. Physics Today 25 (11). Prigogine Y., 1977. Time, Structure and Fluctuations, Nobel Lecture. Ruzzenenti, F., Basosi, R., 2008a The role of the power/efficiency misconception in the rebound effect’s size debate: Does efficiency actually lead to a power enhancement? Energy Policy 36-9, September 2008, 3626-3632. Ruzzenenti F., Basosi R., 2008b The rebound effect: An evolutionary perspective. Ecological Economics, 67 (2008) 526 – 537. Ruzzenenti F., Basosi R., 2009b Complexity change and space symmetry rupture, Ecological Modelling, 220(2009)1880–1885. Ruzzenenti F., Basosi R., 2009a Evaluation of the energy efficiency evolution in the European road freight transport sector. Energy Policy, 37 (2009) 4079–4085. Ruzzenenti, F., Garlaschelli D., Basosi R., Complex Networks and Symmetry: a Review with Applications to the Evolution of World Trade. Article in Press, pre-print: arXiv:1006.3923v1 [q-fin.GN] Saunders, Harry D., 2000. A view from the macro side: rebound, backfire and Khazzoom– Brookes. Energy Policy 28 (6/7), 439–449. Schroeder D., 2000. Thermal Physics, an introduction to. Addison Wesley Longman. Schipper L., Haas R., 1998. Residential energy demand in OECD-countries and the role of irreversible efficiency improvements. Energy Economics 20 (1998) 421-442. Schipper L., Grubb M., 2000 On the rebound? Feedback between energy intensities and energy uses in IEA countries. Energy Policy 28, 367 } 388 Sorrell, S., Dimitropoulos, J., 2007. UKERC Review of Evidence for the Rebound Effect: Technical Report 5—Energy Productivity and Economic Growth Studies. UK Energy Research Centre, London. Sorrell S., 2009. Jevons’ Paradox revisited: The evidence for backfire from improved energy efficiency. Energy Policy, 37 (2009) 1456-1469. Swenson R., 1997. Autokatakinetics, evolution, and the law of maximum entropy production: a principled foundation toward the study of human ecology, in: Freese, L., Advances in human Ecology, vol.&. JAI Press, Greewich, CT, pp. 1-47; 1989. Emergent attractors and the law of maximum entropy production: foundations to a theory of general evolution. Syst. Res. 6, 187-197. Washida T., 2004. Economy-wide Model of Rebound Effect for Environmental Efficiency , proceedings of International Workshop on Sustainable Consumption, University of Leeds, March 5-6, 2004.

Categorizing Barriers to Energy Efficiency: An Interdisciplinary Perspective

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x3 Categorizing Barriers to Energy Efficiency: An Interdisciplinary Perspective Patrik Thollander1, Jenny Palm2 and Patrik Rohdin1 1Energy

systems, Linköping University T, Linköping University Sweden

2Tema

1. Introduction This chapter presents theoretical perspectives on barriers to energy efficiency identified in different scientific disciplines, and briefly describes each barrier and its mode of operation. In an attempt to categorize barriers to energy efficiency, the chapter addresses socio-technical regimes, leading to a novel interdisciplinary categorization of barriers to energy efficiency in three categories: the technological system, the technological regime, and the socio-technical regime. The threat of climate change resulting from the use of fossil fuels is posing a threat to the environment, and energy efficiency is one of the most important means of reducing this threat (IPCC, 2007). Despite this, there are a number of publications stating the existence of a “gap” between potential cost-effective energy efficiency measures and measures actually implemented—the so called “energy efficiency gap” or “energy paradox” (York et al., 1978; Blumstein et al., 1980; Stern and Aronsson, 1984; Hirst and Brown, 1990; Gruber and Brand, 1991; Stern, 1992; DeCanio, 1993; Jaffe and Stavins 1994; Sanstad and Howarth, 1994; Weber, 1997; Ostertag, 1999; Sorrell et al., 2000; Brown, 2001; de Groot et al., 2001; Schleich, 2004; Sorrell et al., 2004; Schleich and Gruber, 2008). This “energy efficiency gap” or “energy paradox” exists due to barriers to energy efficiency. A barrier may be defined as a postulated mechanism that inhibits investments in technologies that are both energyefficient and economically efficient (Sorrell et al., 2004). Barriers are explanations for the reluctance to adopt cost-effective energy efficiency measures derived from mainstream economics, organizational economics, and organizational and behavioural theories. There are also institutional or structural barriers to energy efficiency that do not directly affect the “gap”, even though it does affect the overall level of energy efficiency. Barriers may be divided into three broad categories: Economic, Organizational and Behavioural. Inspired by an extensive review of the existing literature on barriers to energy efficiency, Sorrell et al. (2000) compiled a barrier framework categorized into different barriers (see Table 1; the barriers are explained in greater detail in the following sections of this chapter). It should be noted that the above classification of barriers is not unambiguous; one type of real-world phenomena may be explained by several of the theoretically derived barriers presented (Weber, 1997).

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Jaffe and Stavins (1994) outlined a number of different levels of “energy efficiency potential”, or “energy efficiency gaps” (see Figure 1). The figure states that the actual potential level of energy efficiency depends on which view is applied—while the technologist’s potential is real in a sense, the economist’s potential is actually real for that person or organization, with the difference between the two levels depending on which theoretical perspective is being applied. Theoretical Barriers

Comment

Imperfect information (Howarth and Andersson, 1993) Adverse selection (Sanstad and Howarth, 1994) (Jaffe and Stavins, 1994)

Lack of information may lead to cost-effective energy efficiency measures opportunities being missed. If suppliers know more about the energy performance of goods than purchasers, the purchasers may select goods on the basis of visible aspects such as price.

Principal-agent relationships (Jaffe and Stavins, 1994)

Strict monitoring and control by the principal, since he or she cannot see what the agent is doing, may result in energy efficiency measures being ignored.

Split incentives (Jaffe and Stavins, 1994) (Hirst and Brown, 1990) Hidden costs (Jaffe and Stavins, 1994) (Ostertag, 1999) Access to capital (Hirst and Brown, 1990) (Jaffe and Stavins, 1994) Risk

(Hirst and Brown, 1990) Heterogeneity (Jaffe and Stavins, 1994) Form of information (Stern and Aronsson, 1984) Credibility and trust (Stern and Aronsson, 1984) Values (Stern, 1992)

If a person or department cannot gain benefits from energy efficiency investment it is likely that implementation will be of less interest. Examples of hidden costs are overhead costs, cost of collecting and analyzing information, production disruptions, inconvenience etc.. Limited access to capital may prevent energy efficiency measures from being implemented. Risk aversion may be the reason why energy efficiency measures are constrained by short pay-back criteria. A technology or measure may be cost-effective in general, but not in all cases. Research has shown that the form of information is critical. Information should be specific, vivid, simple, and personal to increase its chances of being accepted. The information source should be credible and trustworthy in order to successfully deliver information regarding energy efficiency measures. If these factors are lacking this will result in inefficient choices. Efficiency improvements are most likely to be successful if there are individuals with real ambition, preferably represented by a key individual within top management.

Inertia (Stern and Aronsson, 1984)

Individuals who are opponents to change within an organization may result in overlooking energy efficiency measures that are costeffective.

Bounded rationality (Sanstad and Howarth, 1994) Power (Sorrell et al., 2000) Culture (Sorrell et al., 2000)

Instead of being based on perfect information, decisions are made by rule of thumb. Low status of energy management may lead to lower priority of energy issues within organizations. Organizations may encourage energy efficiency investments by developing a culture characterized by environmental values.

Table 1. Classification of barriers to energy efficiency (inspired by Sorrell et al., 2000). 1.1 Economic barriers – market failures One important category with regard to barriers is the group of barriers that may be seen as market failures violating the underlying axioms of mainstream economic theory. According

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to mainstream economic theory, a market failure may justify public policy intervention. However, the mere existence of a market failure may not in and of itself be sufficient to justify intervention. As Brown (2001) writes: “The existence of market failures and barriers that inhibit socially optimal levels of investment in energy efficiency is the primary reason for considering public policy interventions. In many instances, feasible, low cost policies can be implemented that either eliminate or compensate for market imperfections and barriers, enabling markets to operate more efficiently to the benefit of society. In other instances, policies may not be feasible; they may not fully eliminate the targeted barrier or imperfection; or they may do so at costs that exceed the benefits.” (Brown, 2001). The elimination of a market failure barrier may thus only be put into operation if the benefits arising from an intervention exceed the cost of implementation. Increasing energy efficiency Hypothetical potential Eliminate market failures in energy markets Technologist's economic potential

Effect of market barriers that cannot be eliminated at acceptable cost

Eliminate high discount rates due to uncertainty, overcome inertia, ignore heterogeneity

True social optimum Additional efficiency justified by environmental externalities

Economist's economic potential

Eliminate market failures in the market for energy efficient technologies

Narrow social optimum Eliminate those market failures whose elimination can pass a benefit/cost test

Baseline or business as usual energy efficiency level

Fig. 1. Different levels of energy efficiency potential (Jaffe and Stavins, 1994). An often cited market failure barrier is imperfect information. Other market failure barriers include asymmetric information, a special form of imperfect information where split incentives,

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adverse selection, and principal-agent relationships may also be categorized. These market failure barriers are presented below. 1.1.1 Imperfect information A large body of research states that consumers are often poorly informed about market conditions, technology characteristics and their own energy use. The lack of adequate information about potential energy-efficient technologies inhibits investments in energy efficiency measures (Sanstad and Howarth, 1994). Insufficient information is one form of imperfect information, such as when the energy performance of energy-efficient technologies is not made available to agents. Another form of imperfect information is the cost of information, meaning that there are costs associated with searching and acquiring information about the energy performance of an energy-efficient technology. Yet another form is the accuracy of information, meaning that the information provider may not always be transparent about the product being offered. Imperfect information is likely to be most serious when the product is purchased infrequently, performance characteristics are difficult to evaluate either before or soon after purchase, and the rate of technology change is rapid relative to the purchase intervals (Sorrell et al., 2000), which is the case for many energy efficiency measures. Issues related to imperfect information may be countered with different forms of information campaigns. 1.1.2 Adverse selection Adverse selection means that producers of energy-efficient equipment are, in general, more informed about the characteristics and performance of equipment than prospective buyers. In other words, the information between the two parties engaged in the transaction is asymmetric. Since asymmetric information is extremely common in real world markets, inefficient outcomes may be the rule rather than the exception (Sanstad and Howarth, 1994). 1.1.3 Principal-agent relationship The principal-agent relationship arises due to a lack of trust between two parties at different levels within an organization or transaction. The owner of a company, who may not be as well-informed about the site-specific criteria for energy efficiency investments, may demand short payback rates/high hurdle rates on energy efficiency investments due to his or her distrust in the executive’s ability to convey such investments—leading to the neglect of costeffective energy efficiency investments (DeCanio 1993; Jaffe and Stavins, 1994). 1.1.4 Split incentives A split incentive may occur when the potential adopter of an investment is not the party that pays the energy bill. If so, information about available cost-effective energy efficiency measures in the hands of the potential adopter may not be sufficient; adoption will only occur if the adopter can recover the investment from the party that enjoys the energy savings (Jaffe and Stavins, 1994). This is often referred to as the landlord-tenant relationship For example, if a mid-level executive pays the energy bill for his or her division based on number of employees, this decreases interest in the organization’s overall in-house energy program to lower energy costs (including investments in energy efficiency technologies),

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since there is “nothing in it” for him or her. This is a restriction to adopting energy-efficient technologies, in particular those with higher initial costs but lower life cycle costs than conventional technologies (Hirst and Brown, 1990). The lack of sub-metering within multidivisional organizations may also be classified as a split incentive. 1.2 Economic barriers: non-market failures Apart from market failure barriers, there are a number of barriers that explain the “gap” but which cannot be categorized as market failures, but are rather non-market failure barriers or market barriers. A market barrier, according to Jaffe and Stavins (1994), may be defined as any factor that may account for the “gap”, while Brown (2001) defines market barriers as obstacles that are not based on market failures but which nonetheless contribute to the slow diffusion and adoption of energy-efficient measures. Barriers that may be categorized as market barriers are, for example, hidden costs, limited access to capital, risk, and heterogeneity. These barriers are presented below. 1.2.1 Hidden costs Hidden costs are often used as an explanatory variable for the “gap” (DeCanio, 1998). In short, the argument is that there are high costs associated with information-seeking, meeting with sellers, writing contracts and other such activities; if these costs are higher than the actual profit from implementation, they inhibit investment. Accordingly, cost-effective measures are not cost-effective when such costs associated with the investment are included. A study by Hein and Blok (1994) found that hidden costs in large energy-intensive industrial firms ranged from three to eight percent of total investment costs. In smaller, nonenergy-intensive firms, such costs are thus likely to be even higher. Hidden costs are a frequently used argument against the existence of an energy efficiency gap; it is argued that engineering-economic models are not able to see the full cost of an energy efficiency measure (Sorrell et al., 2000). 1.2.2 Limited access to capital Technologies that are energy-efficient are often more expensive to purchase than alternative technologies (Almeida, 1998). Moreover, obtaining additional capital in order to invest in energy-efficient technology may be problematic. Apart from low liquidity, limited access to capital may also arise due to restrictions on lending money (Hirst and Brown, 1990). Sometimes such restrictions may be self-imposed. 1.2.3 Risk Even though, for example, managers know what the capital cost is for an energy efficiency investment, there can be uncertainty about the long-term savings in operating costs; this means the investment poses a risk. Such concerns have been found to be very important to decision-makers (Hirst and Brown, 1990). Stern and Aronson (1984) also identify risk as a barrier to energy efficiency, since accurate estimates of the net costs of implementing energy efficiency measures depend on future economic conditions in general, and on future energy prices and availability in particular. Energy prices have fluctuated as long as there has been a market for energy, leading to

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perceptions of uncertainty about future prices. How are consumers to make “rational” choices about the purchase of new energy-using systems such as cars, heating equipment, new buildings, and motors when the basis for estimating long-term operating costs is so uncertain? ... Uncertainty about fuel prices is a barrier to investment in both the manufacture and purchase of energy-efficient systems (Hirst and Brown, 1990). Studies among small and medium-sized enterprises have found that some may not even be able to reduce uncertainty to a calculated risk due to a lack of time and money to calculate the required estimates (Stern and Aronson, 1984). 1.2.4 Heterogeneity The heterogeneity barrier is associated with the fact that even if a given technology is costeffective on average, it will most likely not be so for some individuals or firms. Heterogeneity particularly impacts production processes of companies that often specialize in one type of goods, and where a potential energy efficiency measure may be difficult to implement in another company. Even though similar goods are produced, small differences in the products, such as different size and shape, can inhibit the implementation of the measure in another firm (Jaffe and Stavins, 1994). Heterogeneity may be an explanatory variable for the “gap” when constructing (economic) models of a population of companies, but is less likely to hold if site-specific information exists regarding a cost-effective energy efficiency measure resulting from, for example, an energy audit. 1.3 Behavioural barriers Apart from the explanations for the “gap” outlined above, there are also a number of barriers derived from behavioural sciences that explain the “gap”, such as the form of information, credibility and trust, values, inertia, and bounded rationality. These barriers are presented below. 1.3.1 Form of information One barrier to energy efficiency is the form of information, meaning that information does not always receive as much attention as anticipated, since people are (often) not active information-seekers but rather selective about attending to and assimilating information. Research points out some characteristics in the way information is assimilated; some people, for example, are more likely to remember information if it is specific and presented in a vivid and personalized manner, and comes from a person who is similar to the receiver (Stern and Aronson, 1984; Palm, 2009, 2010). 1.3.2 Credibility and trust Another factor that may inhibit adoption is the receiver’s perceived credibility of and trust in the information provider. Energy users cannot always easily gain accurate information about the ultimate comparative cost of different investment options; they will rely on the most credible available information. The following example from the household sector may illustrate this. Pamphlets describing how to save energy in home air conditioning systems were sent out to 1,000 households in New York. Fifty percent of the households received the information in a mailing from the local electricity utility, and the other half received it from the state regulatory agency for utilities. The following month, households that had received

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the pamphlet from the state agency used about eight percent less electricity than the households that had received the same pamphlet from the local electricity utility (Stern and Aronson, 1984). The effective spread of information thus depends on a trustworthy information provider. As regards the industry, intermediaries such as sector organizations or consultants may play an important role, as these entities or individuals often tend to be regarded as trustworthy (Ramirez et al., 2005; Stern and Aronson, 1984). 1.3.3 Values Values such as helping others, concern for the environment and a moral commitment to use energy more efficiently are influencing individuals and groups of individuals to adopt energy efficiency measures. However, studies of households indicate that norms only have a strong impact on cost-free energy efficiency and energy conservation measures (Stern and Aronson, 1984). A study by Aronson and O’Leary (1983) on showering in a university building showed that the number of students taking short, energy-saving showers increased from six percent when a sign encouraging short showers was put up, to 19 percent when an intrusive sign was used, to 49 percent when the researchers used a student to set an example for others by always turning off the water and soaping up whenever someone came into the facility, and to 67 percent when two students serving as examples were used (Aronsson and O’Leary, 1983). Consequently, a lack of values related to energy efficiency may inhibit measures from being undertaken. 1.3.4 Inertia In short, inertia means that individuals and organizations are, in part, creatures of habit and established routines, which may make it difficult to create changes to such behaviours and habits. This is stated as an explanatory variable to the “gap”. People work to reduce uncertainty and change in their environments, and avoid or ignore problems (Stern and Aronson, 1984). Also, people who have recently made an important decision often seek to justify that decision afterwards—convincing themselves and others that the decision was correct. This description of inertia may partially explain the failure of many energy users to take economically justifiable actions to save energy; energy efficiency also often begins with small commitments that later lead to greater ones (Stern and Aronson, 1984). 1.3.5 Bounded rationality Another explanation for why cost-effective energy efficiency measures are not undertaken is bounded rationality (Simon, 1957). Most types of market failures are concerned with problems in the economic environment that impede economic efficiency even when assuming fully rational agents—that is, utility-maximizing consumers and profitmaximizing firms (Palm and Thollander, 2010). In the case of energy efficiency-related decisions, this hypothesis formally requires decision-makers to solve what may be extremely complex optimization problems in order to obtain the lowest-cost provision of energy services (Sanstad and Howarth, 1994). Studies of organizational decision-making identify two major features of organizations that affect the linkage of a simple rational view to their actions. First, the organization is not a single actor but rather consists of many actors with different, sometimes conflicting, objectives. The interests of one employee or department may, for example, be in conflict with those of others. Second, according to

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Sanstad and Howarth (1994), organizations (just like individuals) to some extent do not act on the basis of complete information but rather make decisions by rule of thumb (Stern and Aronson, 1984). 1.4 Organizational barriers Apart from economic and behavioural barriers, there are also barriers such as power and culture that emerge from organizational theory. These barriers are presented below. 1.4.1 Power Lack of power among energy efficiency decision-makers (e.g., the energy controllers), is often put forth as an explanatory variable for the “gap”. The low importance of energy management within organizations leads to constraints when striving to implement energy efficiency measures (Sorrell et al., 2000). 1.4.2 Culture Culture is closely connected to the values of the individuals forming the culture. An organization’s culture may be seen as the sum of each individual’s values, where the executives’ values or the values of other workers who have influence within the organization may have more impact on the organization’s culture than “lower status” workers (Sorrell et al., 2000). 1.5 Different ways of categorizing barriers to energy efficiency A review of research on barriers to energy efficiency reveals that a number of different means of categorizing barriers exists. A barrier model specifies three features: the objective obstacle, the subject hindered, and the action hindered. The methodological question of how to determine a barrier model is: what is an obstacle to whom reaching what in energy conservation (Weber, 1997)?  What is an obstacle (persons, patterns of behaviour, attitudes, preferences, social norms, habits, needs, organizations, cultural patterns, technical standards, regulations, economic interests, financial incentives, etc.)  ... is an obstacle to whom (consumers, tenants, workers, clerks, managers, voters, politicians, local administration, parties, trade unions, households, firms, nongovernmental organizations)  ... reaching what (buying more efficient equipment, retro-fitting, decreasing an energy tax, establishing a public traffic network, improving operating practices, etc.) Different ways of categorizing barriers to energy efficiency have been developed. Sorrell et al. (2000) distinguish three main categories: market failures, organizational failures and nonfailures, while Weber (1997) classifies the barriers as institutional, economic, organizational and behavioral barriers. Hirst and Brown (1990) made yet another distinction of barriers to energy efficiency, which divides the barriers into two broad categories: structural barriers and behavioral barriers.

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In the following section we will discuss another way of understanding technological development and changes in organizations, namely transition theory and socio-technical regimes.

2. Socio-technical regimes At this stage it is useful to introduce Geels et.al.’s evolutionary model for socio-technical change, which focuses on the dynamics in changing artifacts, technologies, regimes and overall society. The model relies on the work of science and technology studies (STS), which argues that technological and social change are interrelated. In this model, radical novelties are developed in special spaces or technological niches, where they are sheltered from mainstream competition (Schot and Geels, 2008). These can be small market niches or technological niches where resources are provided by public subsidies. Niches need protection because new technologies initially have low price/performance ratios. Since small networks of actors protect the niches, when initiating new technology building social networks is a vital activity (Verbong and Geels, 2007). Niches form the micro level at which radical novelties emerge. The meso level is the regime level, and includes routines, knowledge, defining problems and so on embedded in institutions and infrastructures (Shove 2003). The macro level is the socio-technical landscape, which is the environment that changes slowly. Verbong and Geels (2007) describe the relationship between the three levels as a “nested hierarchy”. New technologies have problems breaking through because of deep-rooted, established regimes. Transition only takes place when all three levels link up and reinforce each other. Geels (2004) has developed Nelson and winter’s “technological regimes” and discusses socio-technical regimes. Technological regimes refer to cognitive routines that are shared in a community of engineers and that guides research and development activities. The technological regime is the rule-set embedded in “engineering practices, production process technologies, product characteristics, skills and procedures, ways of handling relevant artefacts and persons, ways of defining problems; all of them embedded in institutions and infrastructures”. It highlights the fact that engineers act in a social context of social structures, regulations and norms (Geels and Kemp, 2007, pp 443). Technological regimes are broadened to include socio-technical regimes by including the institutional and market aspects needed to make the technical regime work. A socio-technical regime is characterized by the set of rules that guide technical design, as well as the rules that shape market development such as user preferences and rules for regulating these markets (Schot and Geels, 2007). The use of socio-technical regimes also implies the existence of different regimes and the existence of a connection and mutual dependency between them. In a company, different social groups can be distinguished by their own special features. Actors within these groups then share a set of rules, or a regime. Because different groups share different rules, it is possible to distinguish different regimes, such as technological regimes, science regimes, and financial regimes and so on. They share aims, values, problems, agendas, professional journals, etc. However, rules are not just linked within regimes but also between regimes, and regimes influence each other; this is why socio-technical regimes are a better concept for explaining this (Geels, 2004). When regimes are widened to sociotechnical regimes, they include interaction with other social groups, besides engineers and firms, in society such as users, policy-makers and social groups. Regimes not only refer to

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cognitive routines and belief systems, but also to regulative rules and normative roles. From this perspective, different regimes are relatively autonomous, but also interdependent. A socio-technical regime thus binds producers, users and regulators together. As mentioned above, the socio-technical regime forms the meso level, which accounts for the stability of existing large-scale systems such as energy systems. The macro level is formed by the socio-technical landscape, and cannot be under direct influence of niche and regime actors. Changes at the landscape level occur slowly. Niche actors hope that novelties will eventually be used in the regime. Niche actors can contribute to changes in the practices and routines of existing regime actors. Sometimes niches can also replace the existing regime. It is not easy, however, to replace an established regime, not least because of lock-in effects wherein new technology often needs to fit into existing system solutions (Schot and Geels, 2008). Socio-technical regimes highlight the fact that actors are embedded in structures that shape their preferences, aims and strategies. But from this perspective, actors also have agency and perform conscious and strategic actions. The model confirms Gidden’s duality of structure, and when that structure produces and mediates action. Actors can then act upon and restructure these systems (Geels, 2004). Regimes then implement and (re)produce rules in social activities that take place in local practices. By implementing shared rule systems, the regime actors generate patterns of activity that are similar across different local practices. There may be variation, however, between local practices due to the fact that there are differences between group members, so regimes can have somewhat different strategies, resources, problems and aims. Strategies, aims and the like are also not very flexible within a regime, and undergo only incremental change over time (Geels, 2004). In addition, incremental innovation still occurs in stable regimes and is important because these changes can accumulate and result in major performance improvements over time (Geels and Kemp, 2007). A dominant regime can be forced to restructure and invest in new technical directions. For example, changes in the socio-technical landscape can put pressure on the regime. Climate change has forced the energy and transport sector to find new technical strategies. Internal technical problems, change in user preferences and negative externalities such as health risks may also trigger actors to act. Competitive games between firms are another example of developments that can open up a regime (Geels, 2004). If we cross-pollinate barriers theories with ideas from transition theories and socio-technical regimes, we have a new categorization of barriers and, therefore, a new way of reflecting on and discussing efficiency gaps. This will be discussed in the following section.

3. Conclusions: A proposed structure for empirical studies on barriers to energy efficiency How we define a problem determines whether we can solve it; this is elementary knowledge in all of the sciences. Clear definitions are the foundation for all innovative thoughts, which is why it is important to discuss how barriers to energy efficiency can be categorized in potentially different ways. In an attempt to categorize barriers to energy efficiency, the 15 theoretical barriers are divided into three different categories, depending on each barrier’s system complexity (see table 2). In the first category—the technical system—the results are quite restricted to technology and its associated costs. In the second category—the technological regime—the results are influenced by human factors but nevertheless coupled

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to the technology in question. In the third category—the socio-technical regime—the results are heavily influenced by human factors, and less influenced by the technology in question.

Classification

The technical system

The technological regime

The socio-technical regime

Theoretical Barriers Access to capital (Hirst and Brown, 1990) Heterogeneity (Jaffe and Stavins, 1994) Hidden costs (Ostertag, 1999) Risk (Hirst and Brown, 1990) Imperfect information (Howarth and Andersson, 1993) Adverse selection (Sanstad and Howarth, 1994) Split incentives (Jaffe and Stavins, 1994) Form of information (Stern and Aronsson, 1984) Credibility and trust (Stern and Aronsson, 1984) Principal-agent relationship (Jaffe and Stavins, 1994) Values (Stern, 1992) Inertia (Stern and Aronsson, 1984) Bounded rationality (Sanstad and Howarth, 1994) Power (Sorrell et al., 2000) Culture (Sorrell et al., 2000)

Table 2. Proposed classification of barriers to energy efficiency. Re-defining how we should categorize barriers could open up new ways of looking at the problem, which in turn might lead to other suggestions for addressing the energy efficiency gap. Energy efficiency problems are multi-faceted and should be approached accordingly. If a barrier is identified as belonging to a technological regime or a socio-technical regime, it should be approached differently and addressed via different policy means. If a barrier is seen as belonging to a technological regime, then more information on existing energy efficient measures could be a possible solution. If a barrier is more related to a sociotechnical perspective on barriers, then aspects such as corporate culture and established

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internal values should be problematized and highlighted. In other words, how we perceive and define these barriers will lead to different solutions for overcoming the barriers and, ultimately, to different policy recommendations. Finding solutions to the energy efficiency gap is vital for solving the climate change problem. To define and redefine the empirically identified barriers is therefore important for challenging existing solutions and developing new, creative ways of approaching companies and other actors. Employing this categorization of barriers would lead to a greater focus on social practices in companies and existing routines in decision-making and industrial processes.

4. References Almeida, E. L. (1998). Energy efficiency and the limits of market forces: The example of the electric motor market in France. Energy Policy, 26, 8, 643–653, ISSN 0301-4215. Aronson, E., O’Leary, M. (1983). The relative effectiveness of models and prompts on energy conservation: field experiment in a shower room. Journal of Environmental Systems, 12, 3, 219-224, ISSN 0047-2433. Blumstein, C., Krieg, B., Schipper, L., York, C.M. (1980). Overcoming social and institutional barriers to energy conservation. Energy, 5, 355-371, ISSN 0144-2600. Brown, M.A. (2001). Market failures and barriers as a basis for clean energy policies., Energy Policy, 29, 14, 1197-1207, ISSN 0301-4215. de Groot, H., Verhoef, E., Nijkamp, P. (2001). Energy saving by firms: decision-making, barriers and policies. Energy Economics, 23, 6, 717-740, ISSN 0140-9833. DeCanio, S. (1998). The efficiency paradox: bureaucratic and organizational barriers to profitable energy-saving investments. Energy Policy, 26, 5, 441-458, ISSN 0301-4215. DeCanio, S. (1993). Barriers within firms to energy efficient investments. Energy Policy, 9, 1, 906-914, ISSN 0301-4215. Geels, F. (2004) From Sectoral systems of innovation to socio-technical systems. Insights about dynamics and change from sociology and institutional theory. Research policy, 33, 897-920, ISSN 0048-7333. Geels, F and Kemp, R. (2007). Dynamics in socio-technical systems: Typology of change processes and contrasting case studies. Technology in Society, 29, 441-455, ISSN 0160791x. Gruber, E., Brand, M. (1991). Promoting energy conservation in small and medium-sized companies. Energy Policy, 19, 3, 279-287, ISSN 0301-4215. Hein, L., Blok, K. (1995). Transaction costs of energy efficiency improvement. In Proceedings of the 1995 ECEEE summer study, Panel 2, 1-8. Hirst, E., Brown, M., A.( 1990). Closing the efficiency gap: barriers to the efficient use of energy. Resources, Conservation and Recycling, 3, 4, 267-281, ISSN 0921-3449. Howarth, R., Andersson, B. (1993). Market barriers to energy efficiency. Energy Economics, 15, 4), 262-272, ISSN 0140-9833. Jaffe, A.B., Stavins, R.N. (1994). The energy efficiency gap: what does it mean? Energy Policy, 22, 10, 60-71, ISSN 0301-4215.

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Ostertag, K. (1999). Transaction Costs of Raising Energy Efficiency. In: Proceedings of the 2007 IEA international Workshop on Technologies to Reduce Greenhouse gas Emissions: Engineering-Economic Analyses of Conserved Energy and Carbon. Washington DC, 5-7 May 1999. Palm, J. (2009). Placing barriers to industrial energy efficiency in a social context: a discussion of lifestyle categorisation. Energy Efficiency, 2, 3, 263-270, ISSN 1570-646x. Palm, J. (2010). The public-private divide in household bahavior. How far into the home can energy guidance reach? Energy Policy, 38, 6, 2858-2864, ISSN 0301-4215. Palm, J. and Thollander, P. (2010). An interdisciplinary perspective on industrial energy efficiency. Applied Energy 87, 10, 3255-3261, ISSN 0306-2619. Ramirez, C.A., Patel, M., Blok, K. (2005). The non-energy intensive manufacturing sector. An energy analysis relating to the Netherlands. Energy, 30, 5, 749-767, ISSN 0144-2600. Rohdin, P., Thollander, P. (2006). Barriers to and driving forces for energy efficiency in the non-energy-intensive manufacturing industry in Sweden, Energy 31, 12, 1836-1844, ISSN 0144-2600. Rohdin, P., Thollander, P., Solding, P., 2007. Barriers to and drivers for energy efficiency in the Swedish foundry industry. Energy Policy doi: 10.1016 35, 1, 672-677, ISSN 0301-4215. Sanstad, A., Howarth, R.,(1994). ‘Normal’ markets, market imperfections and energy efficiency. Energy Policy, 10, 811-818, ISSN 0301-4215. Schleich, J., Gruber, E. (2008). Beyond case studies: Barriers to energy efficiency in commerce and the services sector. Energy Economics, 30, 2, 449-464, ISSN 0140-9833. Schleich, J. (2004). Do energy audits help reduce barriers to energy efficiency? An empirical analysis for Germany. International Journal of Energy Technology and Policy, 2, 3, 226239, ISSN 1472-8923. Schot, J and Geels, F. (2007). Niches in evolutionary theories of technical change. A critical survey of the literature. Journal of Evolutionary Economics, 17, 605-622, ISSN 09369937. Schot, J and Geels, F. (2008) Strategic niche management and sustainable innovation journeys: theory, findings, research agenda and policy. Technology Analysis & Strategig Management, 20, 5, 537-554, ISSN 0953-7325. Shove, E. (2003). Users, Technologies and Expectations of Comfort, Cleanliness and Convenience. Innovation, 16, 2, 193-205, ISSN 1469-8412. Simon, H.A. (1957). Models of Man. Wiley, London. Sorrell S., O'Malley, E., Schleich, J., Scott, S. (2004). The Economics of Energy Efficiency Barriers to Cost-Effective Investment, Edward Elgar, Cheltenham. Sorrell, S., Schleich, J., Scott, S., O’Malley, E., Trace, F., Boede, E., Ostertag, K. Radgen, P. (2000). Reducing Barriers to Energy Efficiency in Public and Private Organizations. Retrieved October 8, 2007, from the SPRU’s (Science and Technology Policy Research) Retrieved October 8, 2007, from: http://www.sussex. ac.uk/Units/spru /publications/reports/ barriers/final.html. Stern, P.C. (1992). What Psychology Knows About Energy Conservation. American Psychologist, 47, 10, 1224-1232, ISSN 0003-066x. Stern, P.C., Aronson, E. (1984, Eds). Energy Use: The Human Dimension, W.H Freeman, 0716716216, New York.

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Thollander, P., Ottosson, M., 2008. An energy-efficient Swedish pulp and paper industry – exploring barriers to and driving forces for cost-effective energy efficiency investments. Energy Efficiency 1, 1, 21-34, ISSN 1570-646x. Thollander, P., Rohdin, P., Danestig, M., 2007. Energy policies for increased industrial energy efficiency: Evaluation of a local energy programme for manufacturing SMEs. Energy Policy 35, 11, 5774-5783, ISSN 0301-4215. Verbong, G and Geels, F. (2007). The ongoing energy transition: Lessons from a sociotechnical multi-level analysis of the Dutch electricity system (1960-2004). Energy Policy, 35, 1025-1037, ISSN 0301-4215. Weber, L. (1997). Some reflections on barriers to the efficient use of energy. Energy Policy, 25, 10, 833-835, ISSN 0301-4215. York, C.M., Blumstein, C., Krieg, B., Schipper, L. (1978). Bibliography in institutional barriers to energy conservation. Lawrence Berkeley Laboratory and University of California, Berkeley.

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X4 Factors influencing energy efficiency in the German and Colombian manufacturing industries Clara Inés Pardo Martínez

University of Wuppertal, Wuppertal Institute and University of La Salle Germany and Colombia 1. Introduction Energy is a basic factor for industrial production, and the level of electricity consumption is used to measure the progress and economic development of nations. Globally, growing population, industrialisation and rising living standards have substantially increased dependence on energy. As a result, the development of conventional energy resources, the search for new or renewable energy sources, energy conservation (using less energy), and energy efficiency (same service or output, less energy) have become unavoidable topics within politics. Generally, an ideal policy cycle sees a given policy formulated, implemented, monitored and evaluated to verify its effectiveness and fulfilment of the proposed objectives and in accordance with the results of this evaluation, the policy is then kept, reformulated or abolished. In this cycle—and above all, in industrial energy politics—it is important that the policy makers recognise the influence of economic, technical and political factors and have an understanding of the mechanisms that determine energy efficiency performance such that the instruments and strategy they formulate become successful. Strategies and instruments developers drafting an energy policy need to understand the behaviour of the manufacturing industry with respect to energy consumption in order to (i) motivate, (ii) target energy actions that will be adopted, and (iii) develop energy saving and energy efficiency actions and technologies that will be of interest (Kant, 1995 and Thollander et al., 2007). The quantity and quality of energy conservation support or energy efficiency programs will depend on perceived interest and as well as the need for energy conservation changes. There are limited studies and information currently available on the perception of approach to energy efficiency in companies. Therefore, this study seeks to analyse the factors and strategies that address energy efficiency in the manufacturing industries. This information may be useful for energy policy and program development as well as pollution prevention and energy efficiency strategies. The research questions that guide this chapter are:  What is the role of energy consumption and energy efficiency in business strategies in the manufacturing industries?  What are the variables of political factors that may have more influence on energy efficiency performance?

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What are the strategies and instruments that may generate better results to improve energy efficiency in the manufacturing industries? These questions were investigated in this study by means of the opinions and expectations of the main stakeholders (associations and representative firms in Germany and Colombia) through a questionnaire and analysis of literature. This chapter is structured as follows. In section 2, examines energy efficiency policy in both countries. Section 3 shows the methodology used in this study. Section 4 analyses changes in energy efficiency in German and Colombian manufacturing industries. Results and discussion appear in section 5 while the section 6 shows different strategies and recommendations for an effective energy efficiency policy in the Colombian manufacturing industry. The main conclusions of the study are presented in section 7. 

2. General characteristics of energy efficiency policy in Germany and Colombia 2.1 The German energy efficiency policy The German energy policy is based in the commitment to the “3 Es”: energy security, economic efficiency and environmental sustainability. In this context, Germany emphasises environment and climate change objectives, and energy efficiency assumes increased importance in the country’s overall energy policy. Moreover, in the last decade, the key German energy policies have been based on the expansion of the use of renewable energy and the establishment of new energy efficiency targets and an energy research program (IEA, 2007). From the mid-1990s, the dominant instruments employed to improve energy efficiency in the German manufacturing industries were voluntary agreements. Since its introduction in 2004, however, the emissions trading system has become the most important policy measure in the manufacturing industrial sector, and it has also provided a key incentive to raise energy efficiency (Eichhammer, et al., 2006). Regarding cross-cutting measures to improve energy efficiency in Germany, the main policy is the Ecological Tax Reform, i.e., the introduction of a so-called Eco Tax on oil, gas and electricity1. Additionally, the Renewable Energy Sources Act provides digressive compensation rates for new installations for all renewable energies2. The German energy efficiency policies for the manufacturing industries have worked mainly with the following strategies:  Voluntary agreements: the improvements in the efficiency of on-site electricity generation, particularly combined heat and power (CHP).  Eco-tax: Germany's red-green coalition government introduced a set of ecotaxes on 1 April 1999 designed to make energy and resource consumption more expensive while lowering the cost of labour. Taxes on petrol and diesel, electricity, heating oil and natural gas had The tax was introduced in two stages: a first tax increase from 1 April 1999 and a further four-step increase in taxation from 2000 to 2003. There are tax reductions for some consumers, chiefly within the manufacturing industry, agriculture and the railways. The revenue from this tax is used for a reduction of the non-wage labour costs and the promotion of renewable energies (Eichhammer, et al. 2006). 2 The rates are adapted to the efficiency potential of the different branches. This will provide a strong incentive to reduce costs and increase efficiency (Eichhammer, et al. 2006). 1

Factors influencing energy efficiency in the German and Colombian manufacturing industries











 

65

been increased in five stages, and the bulk of the tax revenue generated used to reduce pension insurance contributions. Emission trading system means to achieve ecological and economic success. It means assuring the ecological integrity of the instrument, competition neutrality and low transaction costs. In other words, the emission trading system makes use of market-based mechanisms to encourage the reduction of greenhouse gas emissions in a cost-effective and economically-efficient manner, while maintaining the environmental integrity of the system. Specific Regulations such as: the Energy Performance of Buildings that seek to promote the energy performance of buildings taking into account outdoor climatic and local conditions as well as indoor climate requirements and cost-effectiveness, and the Minimum Energy Performance Standards for appliances or equipments and mandatory labels that are used to increase the energy efficiency of individual technologies. German CHP Law supports of cost efficient technology to reduce CO2 emissions. This law contains the definition of CHP electricity and heat; support mechanism for high efficiency CHP, and mechanise to supervise reporting of CHP electricity production in CHP plants. Renewable Energy Sources Act creates a feed-in tariff system which requires utilities to purchase a predetermined amount of renewable energy at a fixed price. The policy provides economic security for investors and manufacturers and is responsible for the bulk of Germany’s dynamic scale-up of renewable electricity capacity and equipment production. Grants and loans: the Kreditanstalt für Wiederaufbau (KfW) Umweltprogramm (Environment Program) that provides capital for investment in environmental protection activities and the low-interest loans to SMEs that can be used to supplement the European Recovery Programme’s Environment and Energy Saving Program. Technology specific rebates are programs used to promote energy management and new energy-efficient technologies. Public information and advice: the sub-project under the Initiative Energieeffizienz (Energy Efficiency Initiative) campaign, DENA, the German Energy Agency.

2.2 The Colombian energy efficiency policy In 1991, with the introduction of the new Constitution, Colombia adopted the principles of sustainable development as a guide to economic development and assigned to municipalities the duty to regulate especially the industry and energy intensive activities. The deregulation of the Colombian electricity system3 began in the same period, as did the restructuration of the public environmental management system4. These elements have characterised the development of energy policies in this country, where the emphasis has The Colombian electricity industry is characterized by a large hydroelectricity component, close to 70%, and is considered to be one of the most open markets in the developing world, and the market evolution with this model has been satisfactory in terms of investment, competition, efficiency and reduction in electricity losses (Larsen et al., 2004). 4The Colombian environmental administration characterizes to be decentralized, democratic, participatory, fiscally solvent, and socially legitimate with measures as a system of pollution taxes, require environmental impact assessments for large construction projects, and institutionalize legal remedies against polluters (Blackman et al., 2006). 3

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been on the formulation of projects and regulations concerning energy efficiency in the manufacturing industrial sector. Moreover, additional instruments for environmental management involve agreements with industry or other relevant organisations. In 1997, the National Environmental Council approved the National Policy of Clean Production. The key objectives of this consensus-based energy policy were to increase the environmental efficiency and quality of energy resources and to develop environmental guides (guias ambientales) detailing options for improving energy efficiency performance in specific sectors. Other strategies used to increase energy efficiency in the manufacturing industries included the establishment of the energy excellence program (Merito URE), the conversion of urban factories from coal or diesel to natural gas and the development of strategies planning for energy efficiency and renewable energy. Currently, the government is developing two legislation projects to improve energy efficiency: Cogeneration Law and the design of the Colombian program of normalisation, accreditation, certification, and labelling of final use of energy equipment. Hence, Colombian energy policies are based almost entirely on direct regulation. Apart from some small exemptions to VAT taxes for environmental investments, the principal use of economic incentives in energy policies involves the pricing of fuels and agreements with specific manufacturing industrial sector that have high potentials to improve energy efficiency or to carry out changes in technology and renewable energy.

3. Methodology Changes in energy efficiency were monitored by examining energy use by unit of activity and the application of two indicators of energy efficiency. The first indicator (EIi) Measures energy use per euro of gross production (equation 1); and the second indicator (CEIi) Carbon emission intensity the generation of greenhouses gases (in terms of CO2 emissions) per euro of gross production by each sector i of German and Colombian manufacturing industry (equation 2). � (1) ��� � �� �

��� � ������ ��������� ��������� ���⁄��

�� � ������ ����������� �� ��� ������� ������������� �������� � ��� �� � ��� �� � ���������� �� ������� ������ � ���

���� �

��� ��

(3)

���� � ��� ��������� ��������� ���� ���������⁄�� ��� � ��� ��������� ��������

To identify the factors and variables that influencing energy efficiency in the German and Colombian manufacturing industries, we summarises the opinions and expectations of the main stakeholders (associations and representative firms in Germany and Colombia) through a questionnaire and existing scientific studies. The questions were designed to identify factors and variables that determine energy efficiency in the manufacturing industries. It included three sections, each with a unique

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objective. The first section was designed to establish general information about energy consumption, structure of energy source and energy efficiency. The second section was designed to assess and rank the importance of different factors and variables in the achievement of improved energy efficiency performance. Questions were asked on issues relating to economic, technical and political factors with their respective variables. The third section was designed to assess external factors and instruments that would cause or encourage improvements in energy efficiency performance, and what kinds of internal measures or actions would tend to increase energy efficiency performance in the industry.

4. Changes in energy efficiency in German and Colombian manufacturing industries Energy consumption in the manufacturing industries increased by 2.3% in Germany and 5.5% in Colombia during the sample period (figure 1). The manufacturing industries with the largest increases in energy consumption in this period were paper and tobacco in Germany, and the automotive industry and cement industry in Colombia, whereas the largest decrease in Germany was by the cement industry and in Colombia the machinery industry. Energy consumption 1.08

Index 1998 = 1

1.06 1.04 1.02 1 0.98 0.96 0.94 1998

1999

2000

2001

Germany

2002

2003

2004

2005

Colombia

Fig. 1. Energy consumption developments in German and Colombian manufacturing industries Figure 2 shows developments in average energy intensity for the German and Colombian manufacturing industries between 1998 and 2005. In Germany, this indicator decreased 11% and in the Colombian case decreased 10%. In both countries, several energy intensive sectors have driven the decreases in these indicators for the whole manufacturing sector (in the case of Germany, the chemical industry and basic metal, and in Colombia, basic metal and some sectors of the glass industry).

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Energy Efficiency

Energy intensity 1.2

Index 1998 = 1

1.15 1.1 1.05 1 0.95 0.9 0.85 1998

1999

2000

2001

Germany

2002

2003

2004

2005

Colombia

Fig. 2. Energy intensity developments for the German and Colombian manufacturing industries, 1998-2005 The indicator (CEIi) assessed in terms of generation of greenhouse gas emissions, specifically tonnes of CO2 per gross production. In Germany, the manufacturing industries this indicator decreased 10%. The Colombian manufacturing industries decreased 13% this indicator (see figure 3). CO2 emissions intensity 1.20

Index 1998 = 1

1.15 1.10 1.05 1.00 0.95 0.90 0.85 1998

1999

2000

2001

Germany

2002

2003

2004

2005

Colombia

Fig. 3. CO2 emissions intensity developments for the German and Colombian manufacturing industries, 1998-2005 In Colombia, this indicator in general are still very high in comparison to the German manufacturing industries, and thus there are plenty of opportunities for the Colombian manufacturing industries to further lower this indicator and achieve better and cleaner production figures by improved use of energy resources and a better selection of fuels. By achieving these goals, Colombia will be able to meet international environmental requirements and thus will assure its permanence in the market.

Factors influencing energy efficiency in the German and Colombian manufacturing industries

69

5. Results and discussion The opinions and expectations of the main stakeholders as primary data are the following: In the German case, two associations and twelve companies, and in the Colombian case, four associations and 26 companies. (see figure 4). Germany Asociations 14%

Industries 86%

Germany

Automotive industry 20% Food industry 27%

Colombia

Colombia Asociations 13%

Other sectors 17%

Industries 87%

Textil industry 37%

Automotive industry 20%

Textil industry 37%

Food industry 27%

Fig. 4. Breakdown of the primary data from the German and Colombian associations and companies 5.1 Features of energy consumption, energy efficiency and energy source in German and Colombian industries The results of primary data show that in the German and Colombian cases more than 50% of companies or associations consulted have made studies on energy efficiency and that within of these companies and associations, the majority has analysed and assessed energy efficiency performance and its advantages and disadvantages and included the topic of energy efficiency within their business plans and strategies. The results also show that the majority of firms and associations know their energy consumption. However, in both countries, the assessment of energy intensity in the companies and associations is a fairly new topic. Moreover, from 2000 to 2008, the assessment of energy consumption and energy intensity has become more prevalent, indicating, possibly, that within the German and Colombian manufacturing industries, the energy topic is becoming more important in the production system and management. This trend would coincide with the increase in certifications of environmental management systems by the countries’ in the German case 65% and in the Colombian case 30% by year during this period (ISO, 2007). Hence, energy management is a key program to improve sustainability and environmental performance. In both countries, the main energy sources for the firms consulted are electricity and natural gas. Energy costs for the firms were between 0.5% and 3% in the German case and between 0.5% and 5% in the Colombian case.

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Energy Efficiency

The results in both countries indicate that energy management in the manufacturing industries is important for business strategy and that the quantification and assessment of energy consumption and energy efficiency are input indicators to improve upon in optimisation processes working towards sustainability. 5.2 Factors influencing energy efficiency In the German case, 43% of firms and associations consider production technology factors very important, and 71% feel that economic and political factors are important in the improvement of energy efficiency performance. In the Colombian case, economic (69%) and production technology factors (62%) are very important factors in achieving improvement of energy efficiency, whereas the political factor is irrelevant (42%) for firms and associations (see figure 5). These results indicate that in the German case, the firms and associations consider that economic, technical as well as political factors influence energy efficiency, whereas in the Colombian manufacturing industries improvements in energy efficiency are only closely related with economic and production technology factors, mainly because energy efficiency policies are limited and are focalised mainly in support and recommendations of the better technologies.

100% 80% 60% 40% 20% 0%

Germany 14% 71% 14%

Political  Very important

14% 43% 43%

14% 71% 14%

Technical  Economic Important Irrevelant

Colombia

100% 80%

8% 42%

31%

31%

60% 40%

25%

20%

33%

62%

69%

0% Political  Very important

Technical  Economic  Important Irrevelant

Fig. 5. Factors influencing energy efficiency in German and Colombian industries  Variables in economic factors influencing energy efficiency Energy consumption in the manufacturing industrial sector is influenced by the behaviour of several economic variables—e.g., high energy prices or constrained energy supply motivate industrial facilities to try to secure the amount of energy required for operations at the lowest possible price (McKane et al., 2008); structural changes in the manufacturing industries cause shifts in final energy use and energy intensities; and the plant capacity utilisation provides an indication of how efficiently plants and equipment are utilised and consequently, could measure the efficiency of energy use. In the German case, the variables of the economic factor that have the most influence on energy efficiency are improvement in structural operations and maintenance costs and investments in new technologies, equipment or specific activities of energy management

Factors influencing energy efficiency in the German and Colombian manufacturing industries

71

investments. Improvements in plant capacity utilisation and levels of production have less importance. On the other hand, in the Colombian case, all variables of the economic factor are important, but the most relevant are improvement in plant capacity utilisation and improvement in levels of production (see figure 6). These results indicate that manufacturing industries of Germany consider that energy efficiency improvements have higher dependence of investments and production methods, whereas manufacturing industries of Colombia relate energy efficiency improvements with capacity and levels of production. This means that in Germany, improving energy efficiency is important as an investment strategy, whereas in Colombia, energy efficiency is a secondary result from production strategy. This finding concurs with Tholander et al., (2007) who identified the non-priority of energy efficiency investments and lack of access to capital—especially in small and medium enterprises—as main barriers to increased energy efficiency in the manufacturing industries of developing countries in contrast with the situation in developed countries. Moreover, manufacturing industries in developing countries likely prefers traditional investments like expansion of industrial plants or power generation. Furthermore, energy efficiency projects without large capital investments are often perceived as riskier and / or are too small to attract multilateral financial institution lending (UNIDO, 2007).

Germany. Economic factor

100%

50%

0%

14% 71%

29%

29% 57%

29% 57%

14%

100%

29% 50%

57%

14%

SO&MC   Inv.  PCU LP Very important Important Not too important Irrevelant

0%

Colombia. Economic factor 8% 8% 8% 8% 23% 23% 38% 31% 46%

31%

54%

54%

69%

SO&MC   Inv.  PCU LP Very important Important Not too important Irrevelant

Fig. 6. Variables in the economic factors influencing energy efficiency in German and Colombian industries. SO&MC: Improvement in the structure of operation and maintenance costs. Inv.: Investments in new technologies, equipments or specific activities of energy management. PCU: Improvement in plant capacity utilisation. LP: Improvement in levels of production.  Variables in production technology factor influencing energy efficiency The need for improvement of energy efficiency is just one of the drivers for technology development in industry. Moreover, the potential technical energy savings are available based on proven technologies, best practices and use of new energy sources (IEA, 2007). The manufacturing industries of both countries consider the most important technical variable in improving energy efficiency to be changes in process, operations and machinery. However, for German industries, changes in the structure of energy sources and

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Energy Efficiency

consumption patterns are also important, while in the Colombian case, in the emphasis is on improved employment behaviour (see figure 7). These results concur with empirical analysis where energy sources emerging as an important variable that influences energy efficiency and in the case of automotive industry and food industry changes of raw materials have been a key variable to improve energy efficiency. Germany. Technical factor

100% 80% 60% 40% 20%

29%

14%

14%

14%

29% 43%

14%

57%

14%

29%

14% 14%

29%

29%

14%

Very important

CRM IR&D Important

CCP

CSES

IEB

Not too important

60%

15% 31%

29%

20% 0%

CPOM Irrevelant

8%

23%

38% 8% 8%

15%

8% 15%

15%

31%

38%

46%

46%

23%

77%

40%

43%

0% IPO

71%

43%

Colombia. Technical factor 8%

80%

43%

29%

29% 57%

100%

54% 8%

IPO CRM IR&D Very important Important

15% 23%

69% 62%

8% CCP CSES IEB CPOM Not too important Irrevelant

Fig. 7. Variables in the production technology factor influencing energy efficiency in German and Colombian industries. IPO: Increase processes outsourcing. CRM: Changes of raw materials. IR&D: Increase in the resources of R&D. CCP: Changes of consumption patterns. CSES: Changes in the structure of energy sources. IEB: Improvements in employment behaviour. CPOM: Changes in the process, operations and machinery. These results show that the manufacturing industries of both countries feel that the best way to improve energy efficiency is by changes in process, operations and machinery (Germany 71% and Colombia 62%) generally these processes in the organizations begin with an internal analysis of the production process and machinery to determine opportunities to decrease energy consumption and increase energy efficiency. Moreover, in the Colombian case, it’s also important the analysis of employment behaviour because behaviour change erodes the energy savings due to the technical energy efficiency improvements, especially in developing countries (IEA, 2005). Hence, the results confirm that Germany has achieved important developments in energy efficient-technology and significant improvement in energy efficiency performance in the manufacturing industries. According to the Federal Ministry of Economics and Technology, Germany in recent years has achieved a decrease in its energy consumption even though the gross domestic product has more than doubled and German researchers and companies have submitted many global patent applications in the development of energy efficient industrial cross application technologies.  Variables in political factors influencing energy efficiency Market forces and other factors determine energy efficiency in the manufacturing industries. However, these factors can be influenced by an effective energy policy that encourages cost

Factors influencing energy efficiency in the German and Colombian manufacturing industries

73

effective energy efficiency through the application of different types of policy instruments that include information, regulation and economic instruments. Figure 8 shows the results of variables in the political factors affecting energy efficiency in German and Colombian industries. In the German case, the most important variables of the political factor are to encourage the application of energy management in the organizations, mandatory standards (such as the efficiency of electric motors and the efficiency of industrial boilers), and soft loans—especially for cogeneration (CHP). These results concur with Eichhammer, et al. (2006), who showed that only some measures are seen as a highimpact (the first voluntary agreement with German industry from 1995 and the second financial measures (CHP Act, KfW Umweltprogramm)), whereas the impact of the Ecological Tax Reform has been estimated as medium, and other measures have been assessed as low-impact. However, according to studies of Ecofis et al., (2206) voluntary agreements to save energy are adequate in these circumstances when dealing with a small number of actors with which you need to negotiate or a strongly organized sector and / or when there is much relatively cheap energy saving potential. The characteristics that could determine the success of this instrument are the following: the target group motivated to participate, there are penalties in case of non- compliance, there is a good monitoring system, and adequate supporting instruments such as audits, energy monitoring systems, financial incentives and demonstrations projects. Germany. Political factor

100% 80% 60%

29%

29%

0%

43%

29%

40% 20%

14%

29% 57%

71%

Eco‐Tax VA

Very important

14% 29%

43%

14%

14%

29% 29% 57%

43%

Important

MS

G/S

80%

40%

14% 43% 43%

20%

CDM

Not too important

8%

31% 31%

SL

Irrevelant

15%

38% 38%

8%

8% 38%

8% 31%

69%

38% 38% 69% 54% 62%

46% 46% 23% 23%

0% EM

8%

8%

60%

29%

14% 14% IC

Colombia. Political  factor

100%

14% 14% 14% 14%

Eco‐Tax VA

Very important

23%

8% IC

Important

MS

G/S CDM

EM

Not too important

SL

Irrevelant

Fig. 8. Variable in the political factors influencing energy efficiency in German and Colombian industries Eco-tax: Eco-tax.VA: Voluntary audits. IC: Information campaigns. MS: Mandatory standards (the efficiency of electric motors and the efficiency of industrial boilers). G/S: Grants / subsidies. CDM: Emission trading / Clean Development Mechanism. EM: to encourage the application of energy management SL: Soft Loans for Energy Efficiency, Renewable energy and CHP. In the Colombian firms, the most important variables are soft loans (for Energy Efficiency, Renewable energy and cogeneration (CHP)), to encourage energy management and the emissions trading / Clean Development Mechanism—indicating that in this country, a barrier to improved energy efficiency is the limited amount of resources available to change

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Energy Efficiency

technology and to achieve improved energy efficiency, a conclusion which concurs with the studies of Kant, 1995; Tanaka, 2008 and Gillingham et al., 2009. 5.3 Instruments influence interest to improve energy efficiency performance Figure 9 shows that instruments and measures would cause or encourage the German and Colombian manufacturing industries to improve energy efficiency performance. In both countries, the main instruments are changes in upstream sector (energy prices) and institutional regulations, whereas labelling to have a lower impact.

100% 80%

29%

29%

60% 40% 20%

Colombia

Germany

71%

71%

100% 80%

57%

71% 29%

0% CUS

IR

Yes 

VA

Lab

No

23%

31% 69%

60% 40%

43%

8% 92%

77%

20%

69% 31%

0% CUS

IR

Yes

Lab

VA

No

Fig. 9. Percentage of respondents who felt that specific measures and instruments could improve energy efficiency performance CUS: Changes in upstream sector (energy prices). IR: Institutional regulations (Regulatory standards, - Fiscal policy, State aid for R&D). VA: Voluntary agreements. Lab: Labelling (e.g. industrial motors, EMAS, ISO 14001). The results are clear in the German case, where a series of energy-conservation instruments have been implemented to include: the replacement of traditional gas- or oil-fired boilers with condensing gas-fired boilers, the gradual replacement of traditional fuels with more expensive bio-fuel, and the consecutive emergence of integrated gasification combined cycle (CGC) and combined heat and power (CHP) systems. As a result, the energy intensity of Germany has decreased 20% from 1990 to 2003, with an annual decrease rate of 1.75%. Moreover, during the last decade, the energy policy of Germany has been strongly influenced by environmental issues, and the German government has consecutively introduced various acts related to renewable energy and energy efficiency. During 1999, to stimulate energy conservation, energy efficiency, and the application of renewable energy technologies, the German government introduced the Eco-tax, which subsequently became the Renewable Energy Act, which targets a short-term goal of doubling renewable power generation by 2010, together with an intermediate-term goal of increasing renewable power generation capacity to 20% of total power generation capacity by 2020 (Blesl et al., 2007).

Factors influencing energy efficiency in the German and Colombian manufacturing industries

75

5.4 Internal measures and actions the manufacturing industries would consider to increase energy efficiency performance Figure 10 shows the kinds of internal measures and actions the manufacturing industries would consider to increase energy efficiency performance. In the German case, the most important internal measures in order of importance are energy management systems, energy efficiency investments, and changes in machinery and equipment. In the Colombian case, the most important internal measures in order of importance are energy efficiency investments, changes in machinery and equipment, and optimisation of production capacity and production level.

Germany

100%

14% 14%

80% 60% 40%

100%

29% 29% 29%

80%

43% 71%

100%

86% 86%

71% 71% 71%

20%

29%

0%

15% 15% 23%

38% 38% 46% 46%

60% 40%

57%

Colombia

85% 85% 77%

20%

62% 62% 54% 54%

62%

38%

0% EMS EEI CM&E TA

Yes 

VA

TC

No

OCP CIB

EEI CM&E OCP EMS TA

Yes

VA

No

CIB

TC

Fig. 10. Kinds of internal measures and actions the manufacturing industries would consider to increase energy efficiency performance EMS: Energy management systems. EEI: Energy efficiency investment (e.g. changes in machinery, equipments and technology). CM&E: Changes in machinery and equipment. TA: Training activities. VA: Voluntary audit. TC: Major product/process related technological changes, whether or not introduced as part of public/private national and the R&D programmes. OCP: Optimization of production capacity and production level. CIB: Conversion of industrial business (in terms of both products and processes). These results show that in both countries, the manufacturing industrial sector has an interest in increasing their investments to improve energy efficiency through changes in machinery and equipment—demonstrating that the manufacturing industrial sector considers improvements in energy efficiency to be closely related with technological change. This result coincides with opportunities to improve industrial energy efficiency through new technologies such as the use of high-efficiency motor-driven systems, the optimisation of compressed air systems and the potential that exists based on currently available improvements. In fact, the possibility of implementing new and emerging technologies with potential savings of as much as 35 percent in energy costs is creating entirely new lines of business (IAC, 2007). Finally, the results of this study suggest that policy strategies in the manufacturing industries have to utilise legal and fiscal instruments to generate supporting framework conditions as well as targeted programs in the fields of R&D, technological change, market transformation, information, education, dissemination of best practice, etc. Moreover, policy

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Energy Efficiency

will always have to live with unavoidably sub-optimal solutions, while growing knowledge and changing frameworks will constantly impose the need to search for better solutions and new opportunities. In this context, energy policy strategies represent not only (static) problems of policy choice but—above all—dynamic search and learning processes aimed at designing effective policy measures.

6. Recommendations for the formulation of energy-efficiency policies in the Colombian manufacturing industrial sector According to our results and the literature, it is important that there be a formulation of an adequate package of policies and measures that are addressed to guarantee effective and efficient impact to improve energy-efficiency performance and reducing greenhouse emissions in the Colombian manufacturing industries. The following strategies and instruments in policy settings are recommended in order to achieve improvements in energy efficiency in a cost-effective manner: a. Policy support. Policy support should aim at making energy efficiency easy (“Make it easy!”), realisable (“Make it possible!”), and beneficial (“Make it rewarding!”) for stakeholders, thereby contributing to the development of the market for energy-efficient technologies and services. Due to the implementation of the support programmes, it also becomes clear that energy efficiency is politically intended and crucial (“Make it a policy!”). A pre-planned, target-group-specific, differentiated mix of policy instruments and measures is necessary, with integrated measures that are directly addressed to stakeholders. In such a way, the specific situations, incentives, barriers and obstacles of different stakeholders should be addressed by specific policy mixes (Thomas and Irrek, 2007). b. Integral approach. The most effective way to improve industrial energy efficiency is through an integrated approach, where a number of policies and programmes are combined to create a strong overall industrial energy-efficiency policy that addresses a variety of needs in Colombian manufacturing sectors. There should thus be an adoption of a policy of energy-efficiency sector targets and related programmes in which individual manufacturing industrial sectors committed to specific improvements in energy intensity over a given time period in exchange for governmental support in the form of financial incentives, information programmes, demonstration programmes, and training programmes, significant energy savings could be realised. c. Energy efficiency strategies. National energy efficiency strategies in Colombia could accelerate the implementation of energy efficiency in the manufacturing industries. National energy-efficiency strategies should be useful because during their development, implementation and evaluation, they can help to achieve the following: make the vision for energy efficiency explicit; focus attention on the important issues; identify gaps in current work programmes; identify necessary tasks and resources and allocate implementation and monitoring responsibility. d. Energy data. The Colombian government through the statistical office and energy agency (UPME) must improve the availability of high-quality energy efficiency data because

Factors influencing energy efficiency in the German and Colombian manufacturing industries

77

without accurate energy time series data, it is difficult to target and develop appropriate energy efficiency policies in the manufacturing industries. Moreover, for developing sectoral energy efficiency benchmarks and best practices, action plans should: assess energy consumption by end-use in manufacturing industrial sector; identify the economy's energysaving potentials and establish objectives and adequate methods for evaluating the success of the plan. e. Mandatory standards. For the Colombian manufacturing industrial sector, the most important technical variable to improve energy efficiency is change in processes, operations, machinery and equipment. For this reason, the Colombian government should consider adopting mandatory minimum energy performance standards for machinery and equipment (e.g., the efficiency of industrial motors and the efficiency of industrial boilers) in line with international best practices. Moreover, it should examine barriers to the optimisation of energy efficiency through technology systems and design and implement comprehensive policy portfolios aimed at overcoming such barriers. f. Energy management. Among Colombian firms, one of the most important political variables is the encouragement of the application of energy management5. The Colombian government should thus consider providing effective assistance in the development of energy management (EM) capability through the development and maintenance of EM tools, training, certification and quality assurance. Moreover, it should encourage or require major industrial energy users to implement comprehensive energy management procedures and practices that could include, according to IEA, 2008: 

 

The development and adoption of a formal energy management policy. The process and implementation of this policy should be reported and overseen at the company board level and reported in company reports. Within this policy, companies would need to demonstrate that effective organisational structures have been put in place to ensure the following: that decisions regarding the procurement of energy-using equipment are taken with the full knowledge of the equipment's expected life-cycle costs and that procurement managers have an effective incentive to minimise the lifecycle costs of their acquisitions. The appointment of full-time qualified energy managers at both the enterprise- and plant-specific levels as appropriate. The establishment of a scheme to measure, monitor, evaluate and report industrial energy consumption and efficiency at the individual company sector and national levels. As a part of this effort, appropriate energy performance benchmarks should be developed, monitored and reported at levels deemed suitable for each sector.

g. Small and Medium-sized Enterprises (SMEs). The size of company variable was significant for Colombian industry. The Colombian government should thus consider There are significant cost-effective energy savings to be realised in industry through the more widespread adoption of best practices in energy management (EM). EM addresses the way in which an industrial plant or facility is managed to identify and exploit cost-effective energy savings opportunities (IEA, 2008). 5

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Energy Efficiency

developing and implementing a package of policies and measures to promote energy efficiency among SMEs. This package should include: a system for ensuring that energy audits, carried out by qualified engineers, are widely promoted and easily accessible for all SMEs; the provision of high-quality and relevant information on energy-efficiency best practices; the provision of energy performance benchmarking information that ideally would be structured to allow international and national economy comparisons; and appropriate incentives to adopt capital acquisition and procurement procedures with the lowest life-cycle costs. h. Investments. For the Colombian manufacturing industrial sector, the results indicate that energy efficiency investments are a key variable to improve energy efficiency. However, among the many impediments to the adoption of cost-effective energy efficiency investments is the “finance barrier” (Tholander et al., 2007 and IEA, 2008). The Colombian government should facilitate the manufacturing industrial sector’s and stakeholders’ involvement in energy efficiency investments by: I) adopting and publicising to the manufacturing industrial sector a common energy-efficiency savings verification and measurement protocol in order to reduce existing uncertainties in quantifying the benefits of energy efficiency investments and stimulate increased private sector involvement; II) reviewing their current subsidies and fiscal incentive programmes to create more favourable grounds for private energy-efficiency investments; III) collaborating with the private financial sector to establish public-private tools to facilitate energy-efficiency financing; IV) promoting risk-mitigation instruments such as securitisation or public-private partnerships; V) putting in place institutional frameworks to ensure regular co-operation and exchanges on energy efficiency issues between the public sector and financial institutions and VI) design an energy tax programme to provide an incentive to industry to improve energy management at firms’ facilities through both behavioural changes and investments in energy-efficient equipment. i. Taxes and tariff structure. This study demonstrated that energy costs and taxes are important for improving energy efficiency. The Colombian government should design a package of taxes and a tariff structure that include the following: I) the reduction of subsidies or using energy to balance the effect of subsidies, providing the energy consumer with a more realistic indication of the actual costs associated with certain forms of energy; II) the use of taxes to more accurately reflect the environmental costs, or “externalities”, associated with energy consumption; III) the imposition of taxes and fees associated with energy use resulting from energy consumption on users with the goal of creating incentives to reduce wasteful energy consumption practices or creating public programmes and funds for encouraging energy efficiency and IV) having the price system ensure that all individual agents are confronted with the full costs that their decisions impose on others; this means addressing externalities and market failures through a greater use of taxes, charges and tradable permits and correcting policy failures through reforms of support programmes that are environmentally harmful and economically inefficient and have undesirable social effects. j. Control, monitoring and evaluation. Developing effective energy-efficiency policies requires a good understanding of how energy is used as well as the various factors that

Factors influencing energy efficiency in the German and Colombian manufacturing industries

79

drive or restrain demand. Such an understanding requires accurate data on energy end-use and the associated activities. The Colombian government should thus ensure that instruments of energy efficiency policies are adequately monitored, enforced and evaluated so as to ensure maximum compliance and that their energy-efficiency policies are supported by adequate end-use information by substantially increasing their effort to collect energy end-use data across all sectors and relating to all energy types. k. Technology transfer and cooperation. In the Colombian manufacturing industrial sector, this analysis demonstrated that the technology level is still moderate and that this technical factor is a key strategy to improve energy efficiency. The Colombian government should thus promote technology transfer through an appropriate enabling framework in order to enhance international cooperation for the scaling up of sustainable energy solutions. The transfer of technology requires a careful balancing act that includes both fair treatment for innovators and energy policies that stimulate global diffusion of energy technology to address energy efficiency.

7. Conclusions In this chapter analysed the energy efficiency in German and Colombian manufacturing industries in the time period 1998-2005 using economic indicators. We found that the industrial sectors of both countries during the sample period increased their energy consumption by 2.3% in Germany and 5.5% in Colombia and also decreased the energy intensity (11% and 10% respectively). Therefore, German and Colombian manufacturing industries improved energy efficiency and decreased CO2 emissions demonstrating that the trend of manufacturing industry is “make more with less energy consumption and clean production”. Based on the primary data from German and Colombian industrial associations and representative firms in each country, the economic, technical and political factors were studied with respect to impact on energy efficiency. The results in both countries indicate that energy management for the manufacturing industrial sector is important within business strategy and that the quantification and assessment of energy consumption and energy efficiency are input indicators to be used in improvement and optimisation processes within sustainability development. The results also show that in German industry, economic, technical and political factors influence energy efficiency, whereas in the Colombian case, improvements in energy efficiency are closely related with economical and production technology factors. In the German case, the results showed the following: (I) the variables in the economic factor with the most influence on energy efficiency are the structural operations and maintenance costs and investments, whereas plant capacity utilisation and levels of production have lower importance. (II) The most important technical variables to improve energy efficiency are changes in the processes, operations and machinery, changes in the structure of energy sources, and changes of consumption patterns. (III) The most important variables in the political factor are to encourage the application of energy management, mandatory standards (such as the efficiency of electric motors and the efficiency of industrial boilers), and soft loans especially for cogeneration (CHP). (IV) The most important internal measures

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Energy Efficiency

to improve energy efficiency are energy management systems, energy efficiency investment, and changes in machinery and equipment. In the Colombian case, the results showed the following: (I) All variables for the economic factor are important, but the most relevant are plant capacity utilisation and levels of production. (II) The most important technical variables to improve energy efficiency are changes in the processes, operations and machinery, and improvements in employment behaviour. (III) The most important variables of the political factor are soft loans (for Energy Efficiency, Renewable energy and cogeneration (CHP)), to encourage the application of energy management and emissions trading / Clean Development Mechanism. (IV) The most important internal measures for increasing energy efficiency are energy efficiency investments, changes in machinery and equipment and optimisation of production capacity and production level. Moreover, the results suggest that policy strategies in the Colombian manufacturing industrial sector have to combine the following strategies: integral approach, energy data, mandatory standards, energy management, the promotion of energy efficiency in small and medium-sized enterprises, investments, a tax program, an adequate tariff structure, control and evaluation, technology transfer and cooperation. Acknowledgments The author would like to thank Professor Dr Werner Bönte, Dr Wolfang Irrek and Dr Alexander Cotte Poveda for the helpful suggestions and comments. The author is grateful for the support provided by the Wuppertal Institute, Deutscher Akademischer Austausch Dients and the University of La Salle. Any remaining errors are the responsibility of the author.

8. References Blesl M., Das A., Fahl U., Remme U. (2007). Role of energy efficiency standards in reducing CO2 emissions in Germany: An assessment with TIMES. Energy Policy 35, 772-785. Blackman A, Morgenstern R., Montealegre L., Murcia L., and García J. (2006). Review of the efficiency and effectiveness of Colombia’s environmental policies. An RFF Report. Kant A. (1995). Strategies and Instruments to promote energy efficiency in developing countries. Project working paper 5. Effectiveness of industrial energy conservation programmes in IEA countries ECN-C-94-113. ECOFYS, Wuppertal Institut, Lund University. (2006). Guidelines for the monitoring, evaluation and design of energy efficiency policies. How policy theory can guide monitoring and evaluation efforts and support the design of SMART policies. www.aid-ee.org Eichhammer, W., Schlomann, B., Kling N. (2006). Energy Efficiency Policies and Measures in Germany 2006. Monitoring of Energy Efficiency in EU 15 and Norway (ODYSSEEMURE). Fraunhofer Institute for Systems and Innovation Research (Fraunhofer ISI). Gillingham K., Newell R., Palmer K. (2009). Energy efficiency economics and policy. Working Paper 15031. http://www.nber.org/papers/w15031 International Energy Agency (IEA). (2008). Energy efficiency policy recommendations. In support of the G8 Plan of Action. http://www.iea.org/G8/2008/G8_EE_ recommendations.pdf

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International Standard Organisation (ISO). (2007). The ISO Survey of Certifications 2006. www.iso.org Inter Academy Council (IAC). (2007). Lighting the way. Toward a sustainable energy future. www.interacademycouncil.net International Energy Agency (IEA). (2005). The experience with energy efficiency policies and programmes in IEA countries. Learning from the critics. IEA Information paper. International Energy Agency (IEA). (2007). Tracking Industrial Energy Efficiency and CO2 Emissions. In support of the G8 Plan of Action. Energy Indicators. Larsen E., Dyner. I, Bedoya L., Franco C. (2004). Lessons from deregulation in Colombia: successes, failures and the way ahead. Energy policy 32, 1767-1780. McKane A., Price L., Rue S. (2008). Policies for Promoting Industrial Energy Efficiency in Developing Countries and Transition Economies. United Nations Industrial Development Organization. Tanaka K. (2008). Assessment of energy efficiency performance measures in industry and their application for policy. Energy policy (2008), doi:10.1016/j.enpol.2008.03.032. Thomas S., Irrek W. (2007). Wie 20 Prozent Endenergieeinsparung möglich werden können. Worschläge des Wuppertal Instituts zum deutschen Energieeffizinez-Aktionsplan und zu Maßnahmen im Industriebereich. VIK Mitteilungen 3/07, 16-18. Thollander P., Danestig M., Rohdin P. (2007). Energy policies for increased industrial energy efficiency: Evaluation of a local energy programme for manufacturing SMEs. Energy policy 35, 5774–5783. United Nations Industrial Development Organization (UNIDO). (2007). Policies for promoting industrial energy efficiency in developing countries and transition economies. Commission for Sustainable Development (CSD-15). Wuppertal Institute, 2008. Greenhouse Gas Mitigation in Industry in Developing Countries. Final Report. On behalf of the Deutsche Gesellschaft für Technishe Zusammenarbeit (GTZ). http://www.wupperinst.org/en/projects/proj/index.

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Oxyfuel combustion in the steel industry: energy efficiency and decrease of CO2 emissions Joachim von Schéele The Linde Group Germany

1. Introduction The use of oxygen technologies within the steel industry has become increasingly important. During the last decades increased throughput capacity and lowered average cost have been the driving forces, however, today the positive impact on energy savings and reduced emissions have come into the focal point, a fact that seems to be even further pronounced in the future. This chapter describes how the oxygen technologies contribute to increased energy efficiency in the melting and heating processes, how it reduces the fuel consumption and CO2 emission, and how in-plant generated low calorific gases can be effectively used to further improve the overall energy efficiency of a steel production plant, reduce costs and environmental impact. The main production routes for steel are the integrated steel mill and the mini-mill. The integrated steel mill uses iron ore as main source for iron, and includes processes like ore sintering, coke-making, blast furnace iron-making and basic oxygen steel-making. The main piece of equipment at a mini-mill is the electric arc furnace where steel scrap, its main raw material, is melted. Both routes include subsequent casting and downstream heating and rolling (or forging) operations. Dependent on production route and status, a steel mill need 700 to 4,000 kWh to produce 1 tonne of finished product. This corresponds to a CO2 emission of about 0.35 to 2.2 tonne per tonne of steel produced. However, there are great opportunities to increase the efficiency, using oxygen technologies make a substantial positive impact. Relating to how the oxygen is introduced, we basically distinguish between injection of oxygen (normally through a lance) and oxyfuel combustion (applying a burner), however, the end result is the same: oxyfuel combustion. The main processes where oxygen technologies can be applied are: electric arc furnace for scrap melting, blast furnace iron-making, preheating of different vessels (ladles, etc.), and in the downstream reheating and heat treatment. It is a well-known fact that only three things are needed to start and maintain combustion: oxygen, fuel, and sufficient energy for ignition. The combustion process itself would be most efficient if fuel and oxygen can meet without any restrictions. However, in practice it is not simply a question of efficient combustion, the heat transfer efficiency is also extremely important. Nevertheless, it has been clearly demonstrated that if oxygen (and not air) is

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used to combust a fuel, all the heat transfer mechanisms (convection, conduction and radiation) can be promoted at the same time. Air contains 21% oxygen and 79% ballast. In a combustion process, this ballast, practically all nitrogen, has to be heated, without taking part in the process. By using oxygen instead of air we get the beneficial oxyfuel combustion. New demands and challenges from the industry have been met by a continuous development work. As a result, in parallel to the conventional oxyfuel – for example widely used to boost melting in electric arc furnaces – there are today established very interesting technologies. Among those, the most important ones seem to be flameless combustion and direct flame impingement. These new technologies not only fulfil the existing needs with astonishing results, they also open up for completely new areas of application. Flameless oxyfuel is today applied in drying and preheating of ladles and converters, for heating in reheat furnaces and annealing lines, and for melting when avoiding oxidation. It provides excellent temperature uniformity and reduced NOX emissions. Additionally, it can be applied in, for example, preheating of air in the blast furnace hot stoves. The use of direct flame impingement has so far been limited to boosting of strip annealing and galvanizing lines, but its opportunities are almost uncountable. For example, there are ideas about applying this technology to substantially shorten process routes by omitting process steps, or using it in the iron-making step. In reheating, today’s best air-fuel solutions need at least 1.3 GJ (360 kWh) for heating a tonne of steel to the right temperature for rolling or forging; employing oxyfuel the comparable figure is below 1 GJ, a saving of 25%. For continuous heating operations it is also possible to economically operate the furnace at a higher temperature at the entry (loading) side of the furnace. This will even further increase the possible throughput in any furnace unit. Oxyfuel combustion allows all installation pipes and flow trains to be compact without any need for recuperative or regenerative heat recovery solutions. Combustion air-blowers and related low frequency noise problems are avoided. Oxyfuel solutions deliver a unique combination of advantages in reheat and annealing. Thanks to improved thermal efficiency (about 80% compared with 40-60% for air-fuel), the heating rate and productivity are increased and less fuel is required to heat the product to the desired temperature, at the same time saving on CO2 and NOX emissions. In summary the results include:  Throughput capacity increase of up to 50%  Fuel savings of up to 50%  Reduction of CO2 emissions by up to 50%  Reduction of NOX emissions  Reduction of scaling losses (improving the material yield) Compared with conventional oxyfuel, flameless oxyfuel provides even higher production rates, excellent temperature uniformity and very low NOX emissions. Since its commercial introduction in 2003, the leading supplier has made more than 30 installations of the flameless oxyfuel technology, some using a low calorific fuel. This chapter describes the state-of-the-art of oxygen technologies, including results from installations in the steel industry, and discusses their future very interesting possibilities to make the steel production more effective. Oxyfuel combustion has begun to make the steel industry more energy efficiency, but more can be done and, moreover, those technologies can be employed also in other branches of the industry, there as well making improvements of 20-50%.

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2. Oxyfuel combustion technologies Oxyfuel combustion refers to the use of pure, that is industrial grade, oxygen instead of air for combustion of fossil fuels. Oxyfuel technology offers a number of advantages over airfuel combustion. In air-fuel combustion the burner flame contains nitrogen from the combustion air. A significant amount of the fuel energy is used to heat up this nitrogen. The hot nitrogen leaves through the stack, creating energy losses. When avoiding the nitrogen ballast, by the use of industrial grade oxygen, then not only is the combustion itself more efficient but also the heat transfer. Oxyfuel combustion influences the combustion process in a number of ways. The first obvious result is the increase in thermal efficiency due to the reduced exhaust gas volume, a result that is fundamental and valid for all types of oxyfuel burners. In combustion gases, heat radiation is mainly from CO2 and H2O molecules. As there is no, or very low, nitrogen content in an oxyfuel furnace atmosphere, the concentration of highly radiating CO2 and H2O will be very high, a fact which considerably increases heat transfer by gas radiation. A striking feature of oxyfuel combustion is the very high thermal efficiency even at high flue-gas temperatures and no preheating of fuel or oxygen.

Fig. 1. An ingot for bearing steel production is lifted out of a soaking pit furnace at Ascométal in France. The furnace is fired with flameless oxyfuel, heating the ingots uniformly to over 1200°C. In addition to using a burner for the combustion, which normally is operated at stoichiometric conditions, two other technologies should be mentioned: lancing, and postcombustion. Lancing refers to injecting oxygen, sometimes at very high velocities into furnace free-space or a melt. It is done to intensify the air-fuel combustion, either to combust for example carbon into CO, or achieve a complete combustion of a fuel into products like CO2 and H2O. Typically it is employed an Electric Arc Furnace (EAF) for scrap melting, but it could also be like in the case of the REBOX® HLL technology to improve reheating. Post-combustion does in most cases in this context refer to the reaction CO+½O2=CO2, which is strongly exothermic; the released energy is typically used to improve melting. Generally speaking, the prerequisites for a beneficial post-combustion are CO generation,

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oxygen available, and a high heat transfer. For example, charging coal with the scrap in an EAF so that it dissolves into the hot heel and blowing oxygen into the hot heel at simultaneous over-stoichiometric operation of the oxyfuel burners when there is scrap in the furnace, provides such wanted conditions. Post-combustion at flat bath operation, on the other hand, normally provides too low heat transfer efficiency. 2.1. Flameless oxyfuel combustion Some very interesting technologies have emerged in parallel with conventional oxyfuel, which is widely used to boost melting in electric arc furnaces. The most important ones are flameless combustion and Direct Flame Impingement (DFI). These new technologies not only fulfil existing needs with astonishing results, they also open up completely new areas of application. The flameless combustion creates a huge practically invisible oxyfuel flame whereas the DFI technology uses small, well-defined sharp flames. Increasingly stricter legislation on emissions led to the development of flameless oxyfuel, which was introduced for the first time in 2003 in continuous furnaces for strip annealing and slabs reheating, both at the stainless steel producer Outokumpu. The expression 'flameless combustion' communicates the visual aspect of the combustion type, that is, the flame is no longer seen or easily detected by the human eye. Another description might be that combustion is 'extended' in time and space – it is spread out in large volumes, and this is why it is sometimes referred to as 'volume combustion'. Such a flame has a uniform and lower temperature, yet containing same amount of energy. In flameless oxyfuel the mixture of fuel and oxidant reacts uniformly through flame volume, with the rate controlled by partial pressures of reactants and their temperature. The flameless oxyfuel burners effectively disperse the combustion gases throughout the furnace, ensuring more effective and uniform heating of the material even with a limited number of burners installed. The lower flame temperature is substantially reducing the NOX formation. Low NOX emission is also important from a global warming perspective; NO2 has a socalled Global Warming Potential that is almost 300 times that of CO2.

Fig. 2. The principle way of creating flameless combustion; the flame is diluted by the hot furnace gases. This reduces the flame temperature to avoid creation of thermal NOX and to achieve a more homogenous heating of the steel.

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Compared with conventional oxyfuel, flameless oxyfuel provides even higher production rates, excellent temperature uniformity and very low NOX emissions. The first installations of this innovative flameless oxyfuel technology were made by Linde. Since 2003 over 30 installations of this technology have been made at more than a dozen sites, some even using a low calorific fuel. There seems to be an increasing need to combust low calorific fuels; for fuels containing below 2 kWh/m3, use of oxygen is an absolute requirement for flame temperature and stability. At integrated steel mills use of blast furnace top gas (6% of the electricity supplied in an AC furnace and even more in a DC furnace. The increasing use of oxygen has been very important for the development of EAF steelmaking. It begun with the (manual) oxygen lancing, in a first step used to replace the iron ore added during the refining period, but via oxyfuel burners and post-combustion it has developed into a number of more and more sophisticated applications. Today there are EAFs with a specific oxygen use above 50 Nm3/t, more than the Basic Oxygen Furnace (BOF) in integrated steel mills. The average ratio between the electricity savings and the oxygen use, should be about 3.5 kWh/Nm3 O2. When introducing oxygen into an EAF, oxyfuel burners and oxygen lancing are employed in a first stage up to a total use of some 20 to 25 Nm3/t usually with savings in electricity of about 5 kWh/Nm3 O2 or more and with a corresponding increase of the production rate. When evaluating the overall reaction for oxygen lancing, (C+½O2=CO), one should expect electricity savings to be maximum about 2 kWh/Nm3 O2 even taking into account the higher contribution from dissolved carbon in steel scrap and adding energy corresponding to a possible post-combustion value of 8% in the bath-slag system. However, the much higher savings actually achieved, can be explained as follows. The overall reaction takes place in two steps: (1) the injected oxygen immediately combines with iron to form iron oxide, a strongly exothermic reaction, and (2) iron oxide in the slag is reduced by carbon, an endothermic reaction. The first reaction releases almost four times more heat per Nm3 O2 than the overall reaction and this heat will be absorbed by surrounding scrap and significantly speed up the melt-down process. Operating an EAF with under-pressure and especially with the slag door open during most of the operation leads to a heavy in-leakage of air. The oxygen part of this air could of course be of use inside the furnace, but the nitrogen (and argon) part is only to be considered as ballast. The energy demand for heating-up the ballast nitrogen, due to inleakage of air, is 50-60 kWh/t. Even much higher figures, above 100 kWh/t, have been found at several EAF shops. The solution to this is to keep the slag door shut during the main part of the operation and run the furnace with a slight overpressure. Since oxygen lancing was introduced, it has at most EAF shops been carried out by lancing through the slag door. Even if this way of lancing allows moving the injection point in all directions, the oxygen introduced will not be equally distributed throughout the bath. The trend of the EAF becoming more and more air-tight and the dynamic impact of a shorter meltdown time made it increasingly harder to use the conventional way of lancing oxygen and coal through the slag door. Nowadays we find combined equipment including all the functions: oxygen lancing, coal lancing, oxyfuel burners, and post-combustion. This equipment can be considered as combined lance-burners often with a coherent jet function

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enabling high-velocity injection, with a device for coal injection, where the burner also can be run overstoichiometrically to provide post-combustion or there is a separate nozzle for oxygen injection. To secure a good distribution of the heat supply throughout the furnace, including also the rear end of an Eccentric Bottom Tapping (EBT) type furnace, and the advantage of combining oxygen injection with oxyfuel burner operation, we end up with a minimum of four wall-mounted injection devices (assuming an AC furnace) – one at each cold spot between the electrodes and one in the EBT area. The main factor limiting the energy supply from oxyfuel burners in an EAF is the heat transfer efficiency, which decreases with increased scrap temperature - we here have to compare with heat transfer from the electric arcs. However, as long as this heat transfer efficiency enables a decreased average cost for the production, it is of course beneficial to run the oxyfuel burners. Generally speaking, this normally means operation of the oxyfuel burners during about half of the time needed for the melting of each bucket of scrap charged, but the time is also a function of the production rate demand. The CO/CO2 ratio in equilibrium with liquid steel is high, even at low carbon contents. This result in a CO-rich gas leaving the bath-slag system in the furnace providing a potential for large energy recovery if this CO can be burnt with O2 into CO2 and the heat released be transferred to the metal. To illustrate the potential of post-combustion, we can say that in an EAF operation with a high coal injection, the energy released from the formation of CO is about 25 kWh/t, but if this entire CO can be transferred into CO2 the total amount of energy released will be about 140 kWh/t. This should preferably be done with pure oxygen in order to minimize losses to the flue-gases. Electricity savings from post-combustion are in the range 3-5 kWh/Nm3 O2, and can be obtained with rather simple means such as oxygen injection at fixed flow rates through existing oxyfuel burners during fixed periods of time, or by running the oxyfuel burners overstoichiometrically. For reaching high values, oxygen flow control through on-line fluegas analysis and separate post-combustion lances can be used, making a heat recovery of 6075% reasonable.

5. At vessel preheating The use of oxyfuel to preheat vessels such as torpedoes, ladles and converters has been around for several decades. However, the number of installations is still surprisingly low given its potential. Using oxyfuel instead of air-fuel would reduce the fuel consumption drastically by approximately 50%, which would bring about a proportional decrease in CO2 emissions. However, it would also have additional benefits such as a shorter heating time and hotter vessels. These would, for example, lead to fewer ladles in circulation and the possibility of reducing tapping temperatures. The latter directly saves energy in the furnace, but it could also decrease the tap-to-tap time of the furnace. The time saving would lead to additional energy savings as the specific (time dependent) heat losses from a furnace, would then be lowered. If an oxyfuel ladle preheating system is installed adjacent to the EAF, preferably just a few metres away from the tapping position, very hot ladles can be used. Experience shows that such a measure would allow 20 minutes decreased ladle cycle and a 15°C lowered EAF tapping temperature, providing electricity savings at 5-6 kWh/t.

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Let us look at a proven example of what this could lead to. The operating power with oxyfuel for a 60t ladle is approximately 1.2 MW. The average annual level is 0.8 MW, which at 7,500 h/y means 6 GWh/y. This is around half of what would be required with air-fuel; thus the annual saving is 6 GWh. Assuming the fuel is natural gas, the resulting decrease in CO2 emissions would be 1,200 t/y, and this is only for one preheating station; normally there are multiple at each site.

Fig. 7. Ladle preheating using flameless oxyfuel at Ovako’s Hofors Works, Sweden. Conventional oxyfuel delivers a simple, compact and low weight installation as compared to an air-fuel system with a recuperator or regenerative solution. However, in preheating of vessels flameless oxyfuel brings additional strong advantages. Flameless oxyfuel is seen as the best available technology for heating and not only allows for ultra low NOX emissions, but brings extended refractory life through more uniform temperature distribution. The first installation took place in 2003. Today more than 15 installations of flameless oxyfuel are in operation, two recent cases are found at Outokumpu at Tornio, Finland and SKF at Katrineholm, Sweden. In 2008 flameless oxyfuel preheating was installed at Outokumpu’s 90 tonnes ferrochrome converter. The 2.5 MW flameless oxyfuel system is used for drying and preheating of the converter, and provides the Tornio Works with greater energy efficiency, lower fuel consumption, and reduced emissions CO2 and NOX. At SKF a similar type of flameless oxyfuel technology was installed last year, but for preheating ladles. And the size is here completely different; the ladles are for just 1 tonne of steel. Six ladle preheating stands were equipped with OXYGON® flameless oxyfuel preheating systems. This installation shows that a new energy saving and environmentally friendly technology also can be viable in a smaller scale production.

6. At reheating Prompted by rapidly rising fuel prices in the 1970s, the steel industry began to consider methods to reduce fuel consumption in reheating and annealing. This laid the foundation for the use of oxyfuel solutions in rolling mills and forge shops. In the mid 1980s, some of

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these furnaces got equipped with oxygen-enrichment systems, which increased the oxygen content of the combustion air to 23-24%. The results were encouraging: fuel consumption was reduced and the output, in terms of tons per hour, increased. Oxyfuel solutions deliver a unique combination of advantages in reheat and annealing. Thanks to improved thermal efficiency (about 80% compared with 40-60% for air-fuel), the heating rate and productivity are increased and less fuel is required to heat the product to the desired temperature, at the same time saving on CO2 and NOX emissions. In summary the results include:  Throughput capacity increase of up to 50%  Fuel savings of up to 50%  Reduction of CO2 emissions by up to 50%  Reduction of NOX emissions  Reduction of scaling losses In 1990, Linde converted the first steel reheating furnace in the world to operate with 100% oxygen at Timken in the USA Since then, Linde has been pioneering the use of oxyfuel for this application. Today there are 120 reheat furnaces and annealing lines using Linde’s oxyfuel solutions. The best air-fuel solutions need at least 1.3 GJ for heating a tonne of steel to the right temperature for rolling or forging. When using the REBOX oxyfuel solutions the comparable figure is below 1 GJ, a saving of 25%. For continuous heating operations it is also possible to economically operate the furnace at a higher temperature at the entry side of the furnace. This will even further increase the possible throughput in any furnace unit. Oxyfuel combustion allows all installation pipes and flow trains to be compact without any need for recuperative or regenerative heat recovery solutions. Combustion air-blowers and related low frequency noise problems are avoided.

Table 1. With oxyfuel it is possible to achieve an 80% thermal efficiency, as compared with 60% in the best air-fuel cases. Even if also adding the energy needed to produce the required oxygen, we would reach 285 kWh/tonne, thus still close to 1 GJ, a saving of 20%.

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During the last years flameless oxyfuel have been employed, for example in Brazil, China, France, Sweden, and the USA. Here follows some examples from those installations. Soaking pit furnaces at Ascométal There are flameless oxyfuel installations at two sites belonging to the bearing steel producer Ascométal in France, which is part of the Severstal Group. At Fos-sur-Mer, a turnkey delivery in 2005-2007 converted nine soaking pit furnaces into all flameless oxyfuel. The delivery included a combustion system with flameless burners, furnace upgrade, new fluegas system, flow train, and a control system. The furnace sizes are 80 to 120 tonne heating capacity each. The results include 50% more heating capacity, 40% fuel savings, NOX emission reduced by 40%, and scale formation reduced with 3 tonne per 1,000 tonne heated. In a second and similar project in France in 2007-2008, four soaking pit furnaces at the Les Dunes plant were also converted into all flameless oxyfuel operation.

Fig. 8. Total average fuel consumption in the 13 soaking pit furnaces at Ascométal, Fos-surMer. 2001-2004 was all air-fuel combustion. The first conversion into oxyfuel took place in 2005. In 2007 nine out of 13 furnaces were operated with all oxyfuel. The average fuel consumption per tonne for all furnaces was reduced by 100 kWh or 10 Nm3 of natural gas. 15 installations at Outokumpu At Outokumpu’s sites in Sweden there are a total of 15 installations. In 2003, a walking beam furnace in Degerfors was rebuilt and refurbished in a Linde turnkey project with performance guarantees. It entailed replacing the air-fuel system, including recuperator, with flameless oxyfuel, and installation of essential control systems. The resultant 40-50% increase in heating capacity provided increased loading of the rolling mill, reduction of over 25% in fuel consumption and NOX emissions below 70 mg/MJ. At the Nyby plant, there are two catenary furnaces, originally installed in 1955 and 1960 respectively. The catenary furnace on the first annealing-pickling line, for hot or cold rolled strips, was converted to all oxyfuel operation in 2003. Requirements for increased production combined with stricter requirements for low NOX emissions led to this decision. The furnace, 18 m long, was equipped with flameless oxyfuel burners. The total power input, 16 MW, was not altered when converting from air-fuel to oxyfuel, but with oxyfuel the heat transfer efficiency increased from 46% to 76%. The replacement of the air-fuel system, combustion blowers and recuperators resulted in a 50% increase in heating capacity

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without any increase in the length of the furnace, a 40% reduction in specific fuel consumption and NOX levels below the guaranteed level of 70 mg/MJ. At Avesta we find the world’s largest oxyfuel fired furnace, 40 MW. The old 24 m catenary furnace had a 75 tph capacity, but the requirement was to double this whilst at same time meeting strict requirements for emissions. The refurbishment included a 10 m extension, yet production capacity was increased to 150 tph. The conversion involved the removal of airfuel burners and recuperators and the installation of all oxyfuel. The oxyfuel technology used involved staged combustion. The conversion reduced fuel consumption by 40%, and NOX levels are below 65 mg/MJ. This furnace is an example of another route to flameless; having been converted from conventional oxyfuel to flameless oxyfuel last year and resulting in an additional 50% reduction of the NOX levels.

Fig. 9. A heated slab is discharged from the walking beam furnace at Outokumpu’s Degerfors Works. Here flameless oxyfuel has increased the heating capacity by 40-50%. 50% fuel savings at ArcelorMittal There have been several successful installations in rotary hearth furnaces. One is found at ArcelorMittal Shelby in Ohio, USA. In 2007, Linde delivered a turnkey conversion of a 15metre diameter rotary hearth furnace at this seamless tube producer. It included combustion system with flameless burners, furnace upgrade, new flue-gas system, flow train, and a control system. The former air-fuel fired furnace was converted in two steps, first using oxygen-enrichment for a period of time and then implementation of the flameless oxyfuel operation. Excellent results have been achieved, meeting all performance guarantees. These included >25% more throughput, 50% fuel savings compared with oxygen-enrichment (60% below the prior air-fuel performance), CO2 emissions dropped accordingly, NOX emission